The 1997 Financial Crisis in East Asia what’s the economic background before financial crisis ? What the root reasons for this financial crisis? what’s the revelation/remedies?

economic background Rapid economic growth Southeast Asia was one of the world's fastest growing economies. national and civil income increased year by year. Opened financial market attract foreign capital. A flood of hot money went from US and Europe into Southeast countries’ financial markets since the 90s

Reasons Financial level Economic level Regime level

Financial level speculation of international fluid capital (direct reason for financial crisis) direct reason is not the root cause; export slumped badly, short of foreign exchange, current account deficit, high amount of bank bad loans and real estate downturn are potential threats These problems created opportunity for international speculators. unreasonable financial liberalization These countries’ governments open their immature financial market too early and overly loose capital regulation  These policies made countries lost their last line of defense which could resist attack of international speculators

Financial level lack of financial regulation these countries lack effective financial risk prevention and regulation Mistakes of exchange rate policy Passive exchange rate policies These countries’ currencies always peg their currency firmly to the U.S dollar. Any fluctuation of US dollar could cause grave consequences in the region.

these countries’ governments depend too much on foreign investment macroeconomic structure is imbalanced Economic level

Regime level high savings rate(Social economic and cultural factors) Crony capitalism Crony capitalism could be a good model in some period of economic development but it also produces moral hazard issues such as poor regulation and corruption which generate personal profit and harm overall economy

Revelations Government should implement macro control on foreign investment. Government should establish a set of reasonable regulations when introduce foreign capital. Government should introduce more long term capital than short term. Government should Establish regulatory regime of its banking system. Government should prudently participate in the international financial integration

Conclusion