Have The Lessons Learned from The Asian Financial Crisis Been Applied Effectively in Asian Economies?

  •  Masaharu Kanaoka    


To improve the quality of economic managements, this paper attempts to determine whether the lessons of the 1997 Asian financial crisis were effectively applied in Asian economies in the mid-2000s and whether the application mitigated the shocks of the global financial crisis in 2008. We find that many Asian economies applied the lessons effectively but with some exceptions. Compared to mid-1990s, the ratio of the external short-term debt by private creditors to the foreign reserves and the current account deficits improved in almost all the Asian economies in mid-2000s. The total external debts decreased in most economies, specifically in those heavily damaged during the Asian financial crisis. However, some economies seemed to pay little attention to the lessons, as evidenced by the exceptions in the total external debts (the Philippines etc) and in the growth of claims on the private sector (Vietnam etc). Various phenomena during crises also improved, which included the reversal of capital inflow through external bank loans, currency depreciations, changes in the growths of credits to the private sector, and increases in the real external debt burden in domestic currency. However, two areas declined: portfolio investment inflows reversed and export growth decreased. Every economy is advised to apply the lessons learned by the other economies and to prepare for crises in the future.

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