After months defending its currency, the Bank of Thailand let the baht float on July 2, 1997, and it collapsed under the weight of short-term dollar borrowing by Thai banks and firms. Contagion spread through trade and financial linkages to Indonesia, South Korea, Malaysia and the Philippines; by January 1998 the rupiah had lost about 81 percent of its value and the baht about 56 percent. The IMF, with the World Bank, the Asian Development Bank and bilateral lenders, assembled roughly 120 billion dollars in rescue funds for Thailand, Indonesia and South Korea, conditioned on monetary, fiscal and financial-sector reforms that proved deeply unpopular in the region.
Facts
LocationThailand, Indonesia, South Korea and East/Southeast Asia 1 Connections
Associated With
The G20 was conceived directly in response to the emerging-market debt crises of the late 1990s, the 1997 Asian financial crisis foremost among the founders' stated reasons for wanting a broader standing forum.
Source Wikipedia
The IMF led roughly 120 billion dollars in rescue packages for Thailand, Indonesia and South Korea, conditioned on structural reforms.
Source Encyclopaedia Britannica
Critiqued Here
Associated With School
Influenced
Contagion from the 1997 Asian financial crisis and the resulting fall in commodity prices are cited among the crisis's causes.
Source Wikipedia
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Sources
1. Encyclopaedia Britannica
Encyclopaedia Britannica, Inc.- Asian financial crisis of 1997
britannica.com/money/Asian-financial-crisis
Asian financial crisis, major global financial crisis that destabilized the Asian economy and then the world economy at the end of the 1990s.
- Associated With: International Monetary Fund
View the Source 2. Wikipedia
Wikimedia Foundation1997 Asian financial crisis
the Thai government was eventually forced to float the Baht, on 2 July 1997
Associated With: Group of Twenty (G20), G20, Origins
the series of massive debt crises that had spread across emerging markets in the late 1990s, beginning with the Mexican peso crisis and followed by the 1997 Asian financial crisis, the 1998 Russian financial crisis
- Influenced: Russian Financial Crisis (1998), Russian financial crisis (1998)
Associated With: Joseph Stiglitz, 1997 Asian financial crisis, criticism of the real-economy framing
Other economists, including Joseph Stiglitz and Jeffrey Sachs, have downplayed the role of the real economy in the crisis compared to the financial markets.
Associated With School: Keynesian Economics, 1997 Asian financial crisis, IMF structural adjustment response
Critics, however, noted the contractionary nature of these policies, arguing that in a recession, the traditional Keynesian response was to increase government spending, prop up major companies, and lower interest rates.
View the Source Federal Reserve History: Asian Financial Crisis
Federal Reserve HistoryIn Group: Asian, European and Russian Debt and Currency Crises, Page textQuote, In Group: Asian, European and Russian Debt and Currency Crises, Page text
This development, which followed months of speculative pressures that had substantially depleted Thailand's official foreign exchange reserves, marked the beginning of a deep financial crisis across much of East Asia.
Dissenting Readings (1 dissenting reading)
Description
The IMF's own contemporaneous diagnosis blamed "crony capitalism," weak bank supervision and opaque corporate governance in the affected countries, and made structural reform the price of its rescue loans. Critics including Joseph Stiglitz and, separately, Jeffrey Sachs and Steven Radelet argued the crisis was chiefly a self-fulfilling panic among foreign creditors amplified by premature capital-account liberalization the IMF itself had encouraged, and that the Fund's austerity conditions deepened the contraction rather than curing its cause. The dispute reshaped IMF practice on capital controls in the following decade.
A dissenting reading, from Joseph Stiglitz and Jeffrey Sachs, against the IMF's own diagnosisEncyclopaedia Britannica, Encyclopaedia Britannica, Inc.
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