1997 East Asian Crisis

Eco’s assignment:

Table of Contents

1. Introduction

2. How and why the crisis occurred. 


3. How the crises was dealt with. 


4. The economic effects of the crisis. 


5. The long-term ramifications of the crisis. 


6. Conclusion

7. References

1. Introduction

The 1997 East Asian financial crisis left behind many lessons to be learnt for Asia as well as the rest of the world. An outline of this financial crisis will be discussed including; how and why exactly the crisis arose, what was done in terms of handling the crisis, the economic implications that were a result of the crisis, and in conclusion the long-term consequences of the crisis.

2. How & Why the crisis occurred

To understand the origin of the financial crisis one must look back at the years preceding 1997 to get a better picture of the East Asian economies just before the crisis occurred. Even though there is an array of countries in East Asia with many differences, they had a lot of similarities and hence their exposure to the 1997 financial crisis was of a similar nature. These countries experienced rapid growth during this time namely due to their exports, which, thanks to their relatively cheap and well skilled labor, falling international barriers to trade as well as moderate inflation, meant that they were able to keep up with the markets from initially exporting basic goods and materials to progressing into the high tech markets.

The rapid growth experienced during the decade preceding the crisis was attractive from an investing perspective and eventually led to an investment boom. The governments in many of these countries were encouraging investment to many private companies into particular areas of the economy in accordance with “National goals/strategy”. Most investments in these countries were being funded by debt. The interest rates in the US were generally lower than the interest rates offered in the East Asian region...