The Asian Economic Crisis

Abstract

The Asian financial crisis was not a unique event; it had roots in other developments such as the Mexican financial crisis of 1994 and the world debt crisis of the 1980s. It has been feared that a world crisis could envelope all economies at once, but the United States, the European Union, and China have so far avoided crisis situations although they could experience slower expansion and some serious economic im-balances. They feel the effects of the East Asian crisis. Many diverse reasons are responsible for the Asian crisis, and no single issue carries all the blame. Policies for reform must recognize this fact and deal with institutional defects, adequate regulation of newly liberalized markets, speculative practices, and exchange rate mechanisms. In particular, the attempts to link currencies to the US dollar were ill-advised, and more flexible patterns should be put in place for the future. Broadly speaking, crisis-ridden countries should learn from past situations that have generated unstable economic con-ditions and adopt policies that prevent their recurrence or avoid them by other means.