1997 Asian financial crisis

The **Asian financial crisis** was a period of financial crisis. It gripped much of Asia beginning in July 1997.

## Causes

Currency pegs and fixed exchange rates: Many Asian countries, including Thailand, South Korea, and Indonesia, had fixed exchange rate regimes or money pegs to the U.S. dollar. This made their currencies vulnerable to speculative attack.

Rapid capital inflows and excessive borrowing: Asian economies experienced a surge in capital inflows and relied heavily on foreign borrowing, leading to over-investment and unsustainable levels of debt

Weak financial systems and corporate governance: short financial regulations, weak banking sectors, and poor corporate governance practices exacerbated the vulnerabilities in the affected economies

## Consequences

Money reduction: Many Asian currencies experienced significant devaluations, leading to a sharp decline in the value of assets and increased debt burdens for companies with foreign currency liabilities

Financial sector failures: Banks and financial institutions faced insolvency and encountered difficulties in meeting their duty, contributing to a severe banking crisis in the region

Economic contraction and social impact: The crisis resulted in severe economic contractions, rising unemployment, and social hardships, including increased poverty rates and social unrest in some countries

## IMF role

International Monetary Fund (IMF) assistance and conditionality: The IMF provided financial assistance to the affected countries, often in exchange for implementing structural reforms, fiscal austerity measures, and financial sector reforms.

## Malaysia

Mahathir Mohamad was the Prime Minister of Malaysia during the 1997 Asian financial crisis. He took several steps to stabilize Malaysia's economy. This included implementing capital controls to prevent money from leaving the country too quickly, and also introducing stimulus packages to support businesses and the people. It helped Malaysia recover quickly from the crisis, faster than other affected countries.

## Related pages

- 1998 Russian financial crisis

## Papers

- Ngian Kee Jin (March 2000). _Coping with the Asian Financial Crisis: The Singapore Experience_. Institute of Southeast Asian Studies.
- Tiwari, Rajnish (2003). _Post-crisis Exchange Rate Regimes in Southeast Asia_, Seminar Paper, University of Hamburg.
- Kilgour, Andrea (1999). _The changing economic situation in Vietnam: A product of the Asian crisis?_
- Stiglitz, Joseph (1996). _Some Lessons From The East Asian Miracle_. The World Bank Research Observer.
- Weisbrot, Mark (August 2007). _Ten Years After: The Lasting Impact of the Asian Financial Crisis_. Center for Economic and Policy Research.
- Tecson, Marcelo L. (2009), _"IMF Must Renounce Its Weapon of Mass Destruction: High Interest Rates"_ (4-part paper on _high-interest-rate fallacies and alternatives_, emailed to IMF and others on 27 January 2009)

## Other websites

- Women bear brunt of crisis, article by Australian photo-journalist John Le Fevre examining the effects of the Asian Economic Crisis on Asia's female workforce
- The Crash (transcript only), from the PBS series Frontline
- Impact on Indonesia from the Dean Peter Krogh Foreign Affairs Digital Archives
- Congressional Research Service report for US Congress
- Asia's Financial Sector: 12 Things to Know Asian Development Bank