Financial Crises, Recovery & Reforms
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The financial crisis that originated in Thailand on July 2, 1997 spread to other parts of Asia, particularly East Asia, quite rapidly. The extent of the crisis, its spread to economies that had revealed no clear grounds that anything was wrong, and the slow recovery came as a shock to most analysts. Only when the crisis deepened were the fundamental policy shortcomings and their ramifications fully exposed. The realization that while financial crises cannot be eliminated altogether, much could be done to predict them and manage them better has led to further examination of the causes of the crisis. Against this scenario, this book probes into the principal factors that led to the East Asian Crisis. Both the pre-crisis period and the post-crisis period are examined in detail. The IMF’s controversial role and its prescriptions for resolving the crisis are also discussed at length. As there are some similarities between the East Asian and the Mexican financial crisis, a review of the latter is also undertaken. The instrumental roles played by capital flows, exchange rate arrangements and the weakness of the financial systems are analyzed. Since restructuring is necessary to turn the problem-ridden corporate sector into sound and healthy ones in the crisis-affected countries, it is important to emphasize the different aspects of financial and corporate restructuring. The options of restructuring, vulnerabilities in the corporate sector, importance of a bankruptcy law and debt-workouts are all highlighted. As financial sector policies in least developed countries have undergone profound changes during the last three decades, a separate chapter has been devoted to this topic which also covers the impact of financial liberalization and the issue of regulation and supervision of banks. The last chapter of this book attempts to provide some broad guidelines for minimizing the adverse effects of financial crises in the future.
Bhubanesh Pant is, at present, the Director of Horizon Strategists. Prior to this, he worked for the Siam Commercial Bank in Bangkok for three years. He has also served as a consultant to various institutions. Dr. Pant is the author of Trade and Development : Nepal’s Experiences; Obstacles to Growth : Some Experiences of Least Developed Countries; and the co-author of North-South Dialogue : Issues and Options.
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