1. Past Crisis Experiences and its Lessons for Asia Pierre L. Siklos Viessmann Centre & BSIA

2. The Backdrop I The Asian crisis of 1997-98 continues to leave its mark – Most noticeable in the rise of foreign exchange reserves – …but impact outside Asia-Pacific region limited

5. The Backdrop II Financial crises in the US and the € area continue to this day 5 years after it first appeared in the US, 2 years after it erupted in Europe. – Its impact has been global – Raised the question of coupling/de-coupling of business cycles

6. 1997-98 2009-10 Real GDP Growth

7. vis-a-vis US

8. vis-a-vis China

9. Implications #1 – Most crises are regional, only a very few are global – Consequence? Policy responses will be different In Asia, focus has been on protection from ‘foreign’ shocks In the GFC, focus is on regulation, supervision of financial markets, the role of central banks, and fiscal policy’s impact

10. Implications # 2 – Improvements in the ‘delivery’ of monetary policy (viz., central bank transparency) did not prevent the crisis, or spillovers around the world, and is therefore insufficient although these improvements exaggerated IT economies fare much better

11. CENTRAL BANK TRANSPARENCY

12. Implications # 3 – Common currency ideal in Asia-Pacific very much on the back burner. Unlikely to be taken seriously or contemplated in the near future

15. Lessons for Asia? # 1: GFC is yet another failure of international financial institutions (viz., IMF) – This time its not the advice, it’s the capacity, inaction, and inability to apply ‘moral suasion’

16. Lessons for Asia? # 2: International policy coordination might help but cannot be left to existing institutions – It needs champion(s). Are there any in Asia?

17. Lessons for Asia? # 3: Exchange rate regimes should not be managed (whenever possible) – Creates distortions, complicates necessary policy coordination, delays necessary policy responses, not to mention political problems

18. Lessons for Asia? Transparency is a necessary but NOT sufficient conditions in managing crises – There is room for improvement – Sequencing of responses needs to be thought through (e.g., Europe since 2010) – Otherwise, transparency actually can make a bad situation worse