1. The Asian Crisis: a Perspective after Ten Years W. Max Corden Department of Economics University of Melbourne

2. Introduction 0 Focus on four nations: Thailand, Indonesia, Malaysia, Korea 0 The fundamental causes and trigger 0 Financial crisis and exchange rate regime 0 Policy responses 0 Special features of the four nations

3. The Boom 0 Financed by both local savings and by foreign capital inflow 0 Three forms of foreign capital inflow: 1. FDI 2. portfolio capital into local stock markets 3. short-term borrowing

4. The Bust and The Trigger 0 Fundamental cause: investment booms that ended in a period of ‘irrational exuberance’ 0 Trigger in Thailand: domestic and external factors  collapse in exports growth rate  increase in current account deficit  exchange rate crisis (depreciation of Thai) 0 Trigger of the other three countries: Thai Baht depreciation

5. Exchange Rate Regime and Crisis 0 East Asian Crisis  Exchange Rate Crisis 0 Fixed Exchange-rate System: not perceive hedging governments try to keep the value of their currencies constant against another (usually US dollars) 0 Floating Exchange Regime: perceive hedging a currency's value is allowed to fluctuate according to the foreign exchange market.

6. Currency Mismatch- Unhedged Foreign Borrowing 0 Apply to Indonesia, Thailand and Korea 0 Balance Sheet Effects —unhedged foreign borrowing denominated in foreign currency: international short-term borrowing in dollars domestic lending in local currency domestic currency depreciation

7. Recession 0 Decline in Investment 0 Financial crisis due to excessive domestic lending and decline in assets value 0 Reduction of private consumption 0 Currency mismatch on Balance Sheet

8. The Policy Responses 0 Moderate the Depreciation 0 Rescue the Banks 0 Keynesian Demand Expansion Various increases in public expenditure Public sector infrastructure investment Deliberate reductions in interest rates

9. Special Features of Four Countries 0 Thailand: Fixed-but-adjustable Exchange rate Regime(FBAR) 0 Indonesia: economic problem interacted with political problem 0 Korea: achieve more assistance from IMF and US faster recovery 0 Malaysia: have no currency mismatch problem government control on short-term capital outflow

10. Conclusion 0 Boom 0 Bust and Trigger 0 Recession 0 The Policy Responses 0 Special Features of Four countries

11. Thank You!