1997 Asian Financial Crisis

Starting from the early 1980s to mid 1990s Asia’s economic growth soared through the roof. Countries such as Singapore, Korea, Japan, Indonesia and Malaysia were becoming huge players in the global economic market. Rising stock markets brought about a new hoard of money grubbing middle class societies in the Asian continent. The Asian economy was booming. But all good things must eventually come to an end. The year 1997 saw the Asian economy collapse after a series of social and political disturbances followed by currency agitation. The purpose of this paper is to analyze and study the devaluation of the Asian currencies during the financial crisis of 1997, sometimes also referred as the Asian Contagion. The macroeconomic phenomenon closely

Most of the debt these countries owed were short term and while their assets were on a longer period which had the real possibility of being attacked by a liquidity shock. Also right before the crises prices of equity and real estate rose sharply. Thus, when the financial bubble occurred, mass hysteria and panic took to the streets and everything almost crashed and

A currency crisis occurs when a country’s central bank do not have sufficient foreign exchange funds to maintain a currency’s fixed exchange rate. The national stock market and currencies of the East Asian regions were under pressure in 1997. Once the Thai Baht started to depreciate in July of 1997, currencies of other countries such as Malaysia, Indonesia, Korea began to began to depreciate as well. All of this was because all these nations had weak macroeconomic policies and Thailand was affected the most from the starting of all this because their macroeconomic policy was the weakest. The Thai Baht was pegged with the U.S. dollar which meant that as the dollar appreciated the baht would also appreciate. The baht was supported by its foreign reserves. The baht was finally forced to float because the depreciation reached staggering heights (Choudhry,