Radelet, Steven, and Jerey Sachs (1998), "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects," mimeo, Harvard University.  Home/Search   Document Not in Database   Summary   Related Articles   Check

....and credit, driving up prices. Whereas credit grew much faster than nominal GDP in the early 1990s in Thailand and Indonesia, credit growth slowed in 1995 and 1996 (see Goldstein and Hawkins (1998) Table 7) Even more notably, real exchange rates did not rise much (see Figure 3) 9,10 8 Radelet and Sachs (1998), quoting OECD data, show returns falling between the 1980s and 1990s, but still well above worldwide returns. 9 For a couple of years before the crisis, there was some rise in real effective exchange rates in Thailand and Indonesia, but this was largely a result of the appreciation of the US ....

Radelet, S. and J.D. Sachs (1998), `The East Asian Financial Crisis: Diagnosis, Remedies, Prospects', Brookings Papers on Economic Activity, 1, pp. 1-74.

....crisis: first, why did the crisis occur; and, second, why has the crisis been so protracted. There are many explanations and typologies that have been put forward to explain the financial crisis in East Asia. Corsetti, Pesenti, and Roubini, 1998, Feldstein, 1998, IMF, 1997, Krugman, 1998, and Radelet and Sachs, 1998a and 1998b, Sachs, Tornell and Velasco, 1996, among others, provide typologies of different types of financial crises that may be applicable to East Asia. Box III.1 presents the typology of financial crises as identified by Radelet and Sachs (1998a) Box III.1 Types of Financial Crises Radelet ....

....Feldstein, 1998, IMF, 1997, Krugman, 1998, and Radelet and Sachs, 1998a and 1998b, Sachs, Tornell and Velasco, 1996, among others, provide typologies of different types of financial crises that may be applicable to East Asia. Box III.1 presents the typology of financial crises as identified by Radelet and Sachs (1998a) Box III.1 Types of Financial Crises Radelet and Sachs, 1998a, provide the following typology of financial crises: 1. Macro economic policy induced: basically, the financial crisis is the result of the pursuit of a set of inconsistent macro economic policies. This includes the case of a ....

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Radelet, Steven and Jeffrey Sachs, 1998b, "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects," Brookings Papers on Economic Activity, Panel, Washington, D.C., March 26-27, 1998.

....be that the short run benefit to the economy exceeds the long run loss of commitment value. IV. What does the model have to say about recent crises 4.1 East Asia There are many theories of what caused the East Asian crisis in 1997 1998. Potential culprits include panic stricken foreign investors (Radelet and Sachs (1998)) hedge fund managers out to wreck the upstart Asian economies (Mahathir Mohammed in various speeches) corrupt corporate governance practices (Krugman (1998) Johnson, et al. 1999) Pomerleano (1998) bank moral hazard (Dooley and Shin (1999) and inadequate financial infrastructure (Rajan ....

....foreign banks lent to domestic banks in preference to lending to domestic firms (the exception is Indonesia, where a substantial portion of foreign lending was direct) Second, there seemed no obvious shock to fundamentals prior to the crisis. This has led some (see Chang and Velasco (1999) or Radelet and Sachs (1998)) to argue that the crisis was a result of panics or tipping in a model of multiple equilibria. Third, the crisis spread quickly to other countries in South East Asia, but had little effects on countries in Latin America. Finally, and this is a feature that is less well known, not all foreign ....

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Radelet, Steven and Jeffrey Sachs (1998), "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects", mimeo, Harvard Institute for International Development.

....currency and anticipate the event of a financial crisis. In fact, the argument of moral hazard is not only applicable to the intermediaries, but also to the governments. Proponents of moral hazard argue that IMF creates bailout for the governments or investors in the event of a crisis. However, Radelet and Sachs (1998) do not see the current Asian crisis as a result of carelessness on the part of the investors because they were sure to be bailed out in a crisis. First of all, only state owned enterprises can be bailed out in a crisis. According to Radelet and Sachs, if the creditors feared a risk of a crisis in ....

....and Rose (1996) 18 See Eichengree, Rose and Wyplosz (1996) Sachs, Tornell and Velasco (1996) Kaminsky, Lizondo and Reinhart (1997) and Cerra and Saxena (1998) for construction of this variable. MPI e it it eir it it it , i ( r i,t i,t ### ### ### 17 Radelet and Sachs(1998b) define a financial crisis as a sharp shift from capital inflow to capital outflow between year t 1 and year t. A banking crisis could be defined in either of the two ways: financial distress meaning a situation of insolvency of banks, or financial panic referring to illiquidity in the banking ....

Radelet, Steven and Jeffery Sachs, 1998. "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects", mimeo, Harvard Institute for International Development.

....is essential to develop sets of sound practice in the area of corporate governance (Report of the Working Group on Strengthening Financial Systems 1998, p. vi) Policymakers are developing codes of good corporate governance practices to help prevent future crises (they hope) But others, such as Radelet and Sachs (1998), reject attempts to blame corporate governance for the financial crisis. They focus instead on the use of short term debt and poor risk management by emerging market countries, and on the volatility of short term capital flows. A second goal of this paper is to provide some evidence on the ....

Radelet, Steven and Jeffrey D. Sachs (1998), "The East Asian financial crisis: Diagnosis, remedies, prospects," Brookings Papers on Economic Activity 1, 1-74.

....inflows financed a sharp increase in monetary growth, with the ratio of broad money to international reserves rising rapidly throughout the region at an annual average rate of 6.4 per cent in Indonesia, 2.8 per cent in Malaysia and 3. 9 per cent in Thailand over 1992 1996 (Corsetti et al., 1998, and Radelet and Sachs, 1998), the premium on East Asian interest rates over global rates was not eliminated. 3 However, it is difficult to explain this in a conventional way by interpreting it as representing the extent to which markets expected exchange rates to depreciate, since currency values were stable over this ....

.... The exposure of the banking sector to various forms of risk led Moody s Investor Service to downgrade Thailand s top three banks from Prime 1 to Prime 2 (Nidhiprabha, 1998) As financial institutions began to threaten to fail, the authorities intervened to bail them out (Corsetti, et al. 1998, Radelet and Sachs, 1998b) and claims by the monetary authorities over domestic financial institutions rose sharply from the second quarter of 1996. Indeed, central bank credit to financial institutions in Thailand rose from 2 per cent of GDP in 1996 to 15 per cent by the end of 1997 (World Bank, 1999, pp. 68 69) This ....

Radelet, S. and J. Sachs (1998b), "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects," paper prepared for the Brookings Panel, Washington, DC, 26-27 March, 1998.

....debated. 1 Proponents of the sudden shift view argue that while macroeconomic and other fundamentals had worsened in the mid 1990s, the extent and depth of the crisis cannot be attributed to a deterioration in fundamentals but rather to the panic reaction of domestic and foreign investors (Radelet and Sachs 1998; Stiglitz 1999) Others argue that the crisis reflected structural and policy distortions in the region including weak macroeconomic policies and that fundamental imbalances triggered the crisis Figure 1 East Asia s crisis is of a larger scale than many other crises Percent Source: Caprio ....

Radelet, Steven, and Jeffrey Sachs. 1998. "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects." Brookings Papers on Economic Activity 1.

.... Essentially, such transactions involved borrowing in the mature markets (US, Japan) converting that amount into local currency and investing lending the proceeds in the local market (IMF, 1999) The rapid monetary growth in the region during the boom period (see Corsetti, et al. 1998 and Radelet and Sachs, 1998) suggests that the effects of capital inflows were not being fully sterilized, and stresses that the sustained (non converging) interest rate spread offered by Thailand and other regional countries over international interest rates is an anomaly that remains to be addressed 1 . In their review ....

Radelet, S. and J. Sachs (1998). "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects", Brookings Papers on Economic Activity, 1, pp.1-74.

....current account deficits. 2 This component of capital flows has been found to be the most volatile, while direct investment is the most stable (World Bank, 1999) 5 rate of 6.4 per cent in Indonesia, 2.8 per cent in Malaysia and 3. 9 per cent in Thailand over 19921996 (Corsetti et al., 1998, and Radelet and Sachs, 1998), the premium on East Asian interest rates over global rates was not eliminated. 3 However, it is difficult to explain this in a conventional way by interpreting it as representing the extent to which markets expected exchange rates to depreciate, since currency values were stable over this ....

.... The exposure of the banking sector to various forms of risk led Moody s Investor Service to downgrade Thailand s top three banks from Prime 1 to Prime 2 (Nidhiprabha, 1998) As financial institutions began to threaten to fail, the authorities intervened to bail them out (Corsetti, et al. 1998, Radelet and Sachs, 1998b) and claims by the monetary authorities over domestic financial institutions rose sharply from the second quarter of 1996. Figure 1 captures this by showing the extent to which central banks in the region provided credit to troubled financial institutions. Thailand stands out. Central bank ....

Radelet, S. and J. Sachs (1998b), "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects," paper prepared for the Brookings Panel, Washington, DC, 26-27 March, 1998.

....that the 2 For discussions of the origins of the crisis from the IMF s perspective, see for instance World Economic Outlook December 1997 and April 1998; and International Capital Markets: Developments, Prospects, and Policy Issues 1998. Some academic surveys of the origins of the crisis include Radelet and Sachs 1998 and 1999; and Corsetti, Roubini, et al. 1998. 3 See Lane and others, 1999. tightening may have been counterproductive given the compromised state of the countries financial systems. Section 6 discusses the role of fiscal adjustment. Section 7 discusses the strategy of structural reform in ....

....of this kind of crisis. Criticisms of the basic strategy of the programs have come from two different points of view. One line of argument starts from the premise that the crisis was basically a liquidity panic resulting from short term foreign currency exposures analogous to a bank run (Radelet and Sachs, 1998). It has thus been argued that the three pronged approach sketched above only exacerbated the panic, by giving investors the misleading impression that something was fundamentally wrong with these economies. On this view, structural reforms were a distraction that imposed costs on economies ....

Radelet, Steven, and Jeffrey D. Sachs, 1998, "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects," Brookings Papers on Economic Activity: 1, pp.1-90.

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Radelet, Steven, and Jerey Sachs (1998), "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects," mimeo, Harvard University.

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Radelet, S. and J. Sachs (1998b). "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects", in W. Brainard and G. Perry (eds.), Brookings Papers on Economic Activity, 1, pp.1-74.

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Radelet, S., and J. D. Sachs, 1998a, "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects," Brookings Papers on Economic Activity 1, pp. 1-74.

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Radelet, S. and J. Sachs (1998b). "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects", Brookings Papers on Economic Activity, 1, pp.1-74.

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Radelet, S. and J. Sachs (1998b). "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects", mimeo, HIID, April.

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Radelet, S. and J. Sachs (1998b). "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects", Brookings Papers on Economic Activity, 1, pp.1-74.

No context found.

Radelet, S. and J. Sachs (1998b). "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects", Brookings Papers on Economic Activity, 1, pp.1-74.

No context found.

Radelet, S. and J. Sachs (1998b). "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects", Brookings Papers on Economic Activity, 1, pp.1-74.

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