Asian financial crisis , major global financial crisis that destabilized the Asian economy and then the world economy at the end of the s. The —98 Asian financial crisis began in Thailand and then quickly spread to neighbouring economies. It began as a currency crisis when Bangkok unpegged the Thai baht from the U. In the first six months, the value of the Indonesian rupiah was down by 80 percent, the Thai baht by more than 50 percent, the South Korean won by nearly 50 percent, and the Malaysian ringgit by 45 percent. Significant in terms of both its magnitude and its scope, the Asian financial crisis became a global crisis when it spread to the Russian and Brazilian economies.
Federal Reserve Bank of San Francisco | What Caused East Asia’s Financial Crisis?
The Asian financial crisis, also called the "Asian Contagion," was a sequence of currency devaluations and other events that began in the summer of and spread through many Asian markets. The currency markets first failed in Thailand as the result of the government's decision to no longer peg the local currency to the U. As a result of the devaluation of Thailand's baht, a large portion of East Asian currencies fell by as much as 38 percent. International stocks also declined as much as 60 percent. Luckily, the Asian financial crisis was stemmed somewhat due to financial intervention from the International Monetary Fund and the World Bank. However, the market declines were also felt in the United States, Europe, and Russia as the Asian economies slumped.
Boom and bust in Asia Interpreting the crisis Lack of incentives for risk management Why a crisis now? Conclusion References Pacific Basin Notes. This series appears on an occasional basis. The collapse of the Thai baht in July was followed by an unprecedented financial crisis in East Asia, from which these economies are still struggling to recover.
Typically countries experienced rapid devaluation and capital outflows as investor confidence turned from over-exuberance to contagious pessimism as the structural imbalances in the economy became more apparent. Due to the financial instability, the IMF was requested to intervene. Unlike the debt crisis in Latin America, the debt crisis in East Asia stemmed from inappropriate borrowing by the private sector.