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1 - Introduction

Published online by Cambridge University Press:  24 July 2009

Shanker Satyanath
Affiliation:
New York University
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Summary

On July 2, 1997, Rerngchai Marakanond, the governor of the Thai central bank, announced that he did not control sufficient foreign reserves to defend his country's currency from speculative attacks. Whereas Asia had been an exceptionally popular destination for international capital in the mid-1990s, this date marked a decisive turning point in lenders' confidence in the region's economic prospects. International lenders began to shift their funds out of Asia in vast quantities. In countries where there were few rules restricting the movement of capital across borders, the outflow of capital was especially astounding. In the second half of 1997 alone capital outflows from these countries amounted to at least $34 billion. The currencies of many of these countries were subjected to devaluations of 40–80% in a matter of months, precipitating the collapse of several banking sectors and causing economic contractions of up to 15 percent of the gross domestic product.

In accounting for this crisis some scholars have focused on the dangers of allowing the liberal inflow of short-term loans; because such loans can be withdrawn rapidly, heavy exposure to these loans renders economies exceptionally vulnerable to sudden shifts in market sentiments. For these scholars the fundamental lesson to be learned from the Asian crisis is that developing countries should retain controls on international capital flows. However, other scholars have argued that the root causes of the crisis go far deeper.

Type
Chapter
Information
Globalization, Politics, and Financial Turmoil
Asia's Banking Crisis
, pp. 1 - 19
Publisher: Cambridge University Press
Print publication year: 2005

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  • Introduction
  • Shanker Satyanath, New York University
  • Book: Globalization, Politics, and Financial Turmoil
  • Online publication: 24 July 2009
  • Chapter DOI: https://doi.org/10.1017/CBO9780511510373.003
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  • Introduction
  • Shanker Satyanath, New York University
  • Book: Globalization, Politics, and Financial Turmoil
  • Online publication: 24 July 2009
  • Chapter DOI: https://doi.org/10.1017/CBO9780511510373.003
Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

  • Introduction
  • Shanker Satyanath, New York University
  • Book: Globalization, Politics, and Financial Turmoil
  • Online publication: 24 July 2009
  • Chapter DOI: https://doi.org/10.1017/CBO9780511510373.003
Available formats
×