The Grey Chronicles


Review of Related Literature, Part 2

This is the second part of an overview of the current research and related studies on the three scenarios NSC faced between 1994 and 2000.

Asian Currency Crisis

Tomita (2000) observed that the 1990s experienced a series of severe international financial crises in places such as Mexico, dubbed as the Mexican tequila, in December 1994; then Thailand, popularly known as the Asian flu in July 1997; and finally hit Russia, the so-called Russian virus, in August 1998. These crises, all occurred in emerging markets, involved a sharp fall in the exchange rate, a rise in interest rates, a sharp contraction in economic activity, a domestic financial crisis and an adjustment to the current account.

Bustelo (2000) argued that, despite some similarities, financial crises in the 1990s have featured substantial differences between them . . . the Mexican crisis of 1994-95 was associated to private overconsumption; and the East Asian crises of 1997-99 were basically the result of private overinvestment.

Majid and Yusoff’s study (2004) examined the determinants of currency crises in Malaysia, Thailand, Indonesia and the Philippines in the period between 1987 and 1997, and found that reserve inadequacy, deteriorating trade balance, increases of bank’s claims on private sector and misalignment of real exchange rate increase the probability of a speculative attack. Bustelo surveyed (1998) the crisis then highlighted (2004) its similarities and differences to the Argentina’s crisis of 2001-02.

Wong (2004) contended that the Asian Financial Crises was not spread through common risk factors, nor the flight of foreign capital be blamed as the major cause of the crisis. The study traced the root of the crisis to several economic policies and conditions of the countries involved like Thailand, Malaysia, and Indonesia prior to its outbreak.

Japan (Shiraishi, 2005) was instrumental in dealing with the Asian economic crises in 1997-98 by suggesting several measures to tackle the problem in the ASEAN. In 1997, Japan called for the establishment of the Asian Monetary Fund. It suggested the new Miyazawa initiative in 1998 to stimulate economies hit by the crisis. It promoted in 2000 the Chiengmai Initiative (Eichengreen, 2002) as a mechanism to create a zone of currency stability; the conclusion of the Japan Singapore Economic Partnership Agreement in 2001. Last but not the least measures was the proposal of Japan’s Prime Minister Koizumi made in Singapore in 2001 for the Japan-ASEAN economic partnership as the first step to build an East Asian community.

Radelet and Sachs (1998) argued that Southeast Asia should devalue their currencies in order to recover from the economic turmoil plaguing the region in the late 1990s. Ahearn (2002) later debunked this claim but instead found that only the Philippines and Malaysia would benefit from devaluation, while Singapore and Korea were more sensitive to short term and long-term policy decisions.

In his speech before the University of the Philippines economists, Salceda (2004) discussed a roadmap to fiscal rehabilitation after detailing the economic issues confronting the Philippines from 1996 to 2003. Noland (2000), however, wondered why the Philippines, with its reputation for weakness, fared better in the crisis than other countries in the region.

Next: Steel Industry


Tomita, Toshiki (2000), The Mechanisms of “21st-Century-Type” International Financial Crises, Research Paper. NRI Papers No. 10, Japan: Nomura Research Institute, 01 August 2000. pp. 1-17. back to text

Bustelo, Pablo (2000), Novelties of Financial Crises in the 1990s and the Search for New Indicators. Emerging Markets Review, Vol 1, No. 3. pp. 1-32, August 2000. back to text

Muhd Zulkhibri Abdul Majid and Mohammed B. Yusoff (2004), “Sources of Asian Currency Crisis.” Malaysia: Monetary and Financial Policy Department, Central Bank of Malaysia, May 2004, p. 14. back to text

Bustelo, Pablo (1998), “The East Asian Financial Crises: An Analytical Survey,” ICEI Working Papers, Num. 10, Madrid: Universidad Complutense de Madrid, 1998. back to text

Bustelo, Pablo (2004). “Capital Flows and Financial Crises: A Comparative Analysis of East Asia (1997-98) and Argentina (2001-02),” Madrid: Department of Applied Economics, Complutense University of Madrid, Working Paper No. 2004-17. October 2004, p. 1-29. back to text

Wong, Marie (2004) “The Asian Financial Crisis and the Integration of Regional Stock Markets.” Masteral Thesis. Middlesex University Business School, 2004, pp. 1-34. back to text

Shiraishi, Takashi (2005) “The Asian Crisis Reconsidered” Discussion Paper. Kyoto, Japan: Center for Southeast Asian Studies, Kyoto University, 2005. RIETI Discussion Paper Series 05-E-014. back to text

Eichengreen, Barry (2002), What to Do with the Chiang Mai Initiative. Proceedings of the Asian Economic Panel Meeting, Tokyo: Asian Economic Panel, May 2002. back to text

Radelet, Steven and Jeffrey Sachs, (1998) “The Onset of the East Asian Financial Crisis,” Research Paper. Cambridge: National Bureau of Economic Research, August, 1998. p. 41. back to text

Ahearn, James, (2002). Should Southeast Asia Devalue? Issues in Political Economy, Vol. 11, Elon University, pp. 14-15. back to text

Salceda, Joey Sarte (2004), “Dimensions of the Philippine Fiscal Crisis: A Roadmap to Fiscal Rehabilitation”, Manila: Economic Affairs, House of Representatives, 17 September 2004 back to text

Noland, Marcus (2000) “How the Sick Man Avoided Pneumonia: The Philippines in the Asian Financial Crisis.” Institute for International Economics, Working Paper 00-5. back to text


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