-Lhamu Tsering.ppt

-Lhamu Tsering Agenda.. East Asia pre crisis Thailand Crisis timeline The dilemma Asian Weaknesses After the shock Countries involved.. Thailand Philippines Hong Kong Taiwan Singapore South Korea Malaysia Indonesia China Thailand.. May 1997: Thailand spends billions of its foreign reserves to defend the Thai baht against speculative attacks In case of Thailand: Allowing too many short-term capital flows to accumulate with a high degree of currency speculation, Sustaining a fixed exchange rate when it was no longer suitable, Lack of sufficient risk management system at the national level as well as regional level. concerns of large current account deficits weakness in the Thai financial system culminating with the failure of a major finance company, Finance One Speculative attacks brings down investor confidence causing- “capital flight” Crisis in Thailand turned out to be a contagion Crisis Timeline.. July 1997 Thailand is forced to devalue the baht, which drops the value of the baht by as much as 20%-- a record (had actually attempted a 15% controlled devaluation) Malaysia’s central bank intervenes to defend the ringgit. The Philippine peso is devalued. Indonesia widens its trading band for the rupiah in a move to discourage speculators The Singapore dollar starts a gradual decline. Crisis timeline..Contd/. August1997 Thailand agrees to adopt tough economic measures proposed by the IMF in return for a $17 billion loan from the international lender and Asian nations. The Thai government closes 42 ailing finance companies and imposes tax hikes as part of the IMFs insistence on austerity Indonesia abandons the rupiahs trading band and allows the currency to float freely, triggering a plunge in the currency Crisis timeline..Contd/. October1997 Indonesia asks the IMF and World Bank for help after the rupiah falls more than 30% in two months, despite interventions by the countrys central bank to prop up the currency Hong Kongs stock index falls 10.4% after