Asian Financial Crisis
An analysis of the Asian Financial and Currency crisis that hit the economies of the South East Asian countries in the summer of 1997.
This paper is about what came to be known as the Asian Financial Crisis of 1997-98, which hit Thailand in July 1997, soon engulfed most of the countries in the region and at one time threatened to spread the world over. It traces the history and background of the crisis, the reasons why it happened, the effects it has had socially, politically and economically. The paper also covers the approaches adopted by the countries involved, and the international financial institutions to overcome the crisis and the lessons that need to be learnt from it. The focus of the paper is on the business and economic aspects of the crisis and only briefly covers its cultural, social, and political ramifications.
“The next country to be affected by the Thai contagion was Philippines. Its central bank tried to support its currency by increasing the interest rates overnight. The Thai finance minister who was against devaluing the country’s currency resigned on June 19. The Thai prime minister continued to declare that his country would never devalue the baht as late as June 30. But things had already gone out of hand as the Thailand’s central bank had limited reserves of dollars and soon ran out of them in trying to defend the bath. The Bank of Thailand was forced to announce a managed float of the currency on July 2 with an SOS to IMF for help. This resulted in a sudden devaluation of baht to record lows against the dollar and the start of the currency crisis in East Asia was well and truly underway.”
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