Asian Financial Crisis Essay

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The Asian financial crisis was indeed a period of financial crisis that gripped much of the East Asia beginning in the month of July 1997 and raised the fears of the worldwide economic meltdown that was associated with the financial contagion. The crisis started mostly in Thailand with the financial collapse of the Thai Baht after the Thai government was made to float the baht by force due to lack of the foreign currency to support its currency peg to the United States dollar. At that time, Thailand had managed to acquire a burden of the foreign debt that made the country effectively bankrupt even before the collapse of its currency.
As the crisis spread, most of the parts of the Southeast Asia and Japan saw the slumping of the currencies
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The emergence of the massive excess capacity in the some of the main export industries and the decline in the unit values and also the rising rates of interest raised the debt service obligation. The Asian crisis represented a case of the market failure and not of the government failure. The other view of the financial liberalization in Asia is that even though it was a right policy for Asia was not implemented correctly. What weakened the financial systems in Asia, was an inappropriate or disorderly manner of the financial liberalization that did not pay much attention to the proper phasing and sequencing of the capital account liberalization.
To conclude, financial liberation is one of the policies that have been cherished over a long period of time. Many nations are usually forced to change their way of doing things and to introduce the aspects of financial liberation. The only major challenge that they go through includes the possibility of improper implementation of the policy. This is what led to the problem that was witnessed in the whole of East Asian countries. It is hence advisable for countries to pay keen attention to the conditions that are prevailing before going ahead to implement the new policy since it can ruin their economy
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