Research paper Summary on Asian Financial Crisis
There are four main shortcomings that can be attributed to the Asian Financial Crisis. One of them is that the economies of Asian nations had poorly coordinated and controlled financial mechanisms for the allocation of capital resources. For the financial sector to operate effectively, these are the major components that have to be in place. Thus, lack of them dealt a heavy blow to the efforts that were being made towards industrialization.
Another reason that brought forth the Asian financial crisis is the lack of foreign exchange in major economies across the region. Some of the countries that were faced with this crisis include Thailand, Indonesia, and South Korea among others. At the time when such discoveries were made by the countries’ respective monetary authorities, various measures were instituted to ensure that their economic statuses were shielded from falling prey to recession. There are various kinds of monetary tools that were used like currency devaluation. However, this was consequential in that it led to the fall of the value of the currency and equity prices.
The United States of America has also been mentioned widely to have played a role in the Asian financial crisis. However, its contribution was indirect considering that the main economic activities were pegged onto the dollar. Due to the shortage in the supply of the currency in the market, imports and exports of main Asian economies were largely affected.
Another major contributor to the Asian financial crisis is the loans taken by the Asian economies. Nations like Japan, Thailand and Singapore had taken huge loans from the International Monetary Fund and the World Bank. These economies were still faced with numerous struggles and constant pressure to repay the loans. As a result of these factors, their economic status moved from bad to worse.
When it became so evident that indeed there was a major financial crisis, the economies began coming up with various measures aimed at averting recession that was looming. The World Bank and the IMF came through to offer a helping hand. The International Monetary Fund organized for several support measures for the economies that were worst hit. The rescue programs were delivered in phases that saw the infusion of finances to the affected economies, but with certain conditions. However, the economies that were awarded the recue plans had to be able to meet the conditions set out in order to get further funding. The United States also played a major role in helping to contain the Asian financial crisis.
Despite the adverse effects that the Asian financial crisis led to, it was a situation that developed gradually over a period of time and could have been prevented if there were ideal economic policies in place. Even though shortcomings in the currency and financial markets may have been the main contributors to the Asian financial crisis, loop holes in the banking and financial sectors also played a key role.