Essay - Case Study: a Political Economy Analysis of Asian Financial Crises...

Case Study: A political economy analysis of Asian Financial Crises

Chapter 4. Case Study: A Political Economy Analysis of ***** Financial Crises

*****.1. Introduction

The Asian financial crisis has spawned a wide range of explanations on its origins. These analyses have been overwhelmingly ec*****omic in their focus. Some explanations have emphasized the internal weaknesses ***** *****se countries (such as an under-supervised fin*****cial system) and some have stressed external trends (such as the growth of international financial flows). Yet others have identified instabilities in ***** markets (for example, investor panic) as the most important factor. This paper looks at a more neglected dimension of the ***** financial crisis, that being ***** role of ***** factors ***** the role of political-economic interaction in initiating ***** crisis, determining the depth ***** the *****, and shaping the recovery from the crisis.

Known ***** ***** G-7 several industrialized countries, specific countries ***** been supplying and controlling the flow of capital funds to third-world countries. These countries are the United States, Canada, France, Great Britain, Germany, Japan, ***** Australia. Because the G-7 group has ***** enormous and far-reaching economic strength, it can dictate and control the interest rate ***** the countries in its group charge to ***** nations that wish to borrow money. This is very significant for the third-world countries when they borrow money because they have little control over the ***** of *****terest that *****y pay and they are not able to 'shop around' and find a better rate for their borrowing.

In the years 1997 and 1998, five Sou*****ast Asian countries - Thailand, Malaysia, the Philippines, Indonesia, and South Korea experienced the largest part of the financial and currency crisis, but there were actually eight countries affected, with Hong Kong, Singapore, and Taiwan being the o*****r three. ***** crisis was largely caused by their inability ***** meet their ***** obligations to the G-7 industrialized countries. This came about partially from the exchange rate ***** U.S. dollars are often very valuable ***** compared with the ***** from other countries, ***** it also came about from political problems ***** the countries ***** facing. The exchange rate can cause problems for countries that are trying to meet their obligations. It may appear that they have enough money to make ***** payments, but when the ***** rate, which fluctuates, comes into play ***** may come up short. The political problems that *****se ***** were facing were ***** problematic, because there was no common market and no agreement on currency or exchange between the countries ***** would remain steady for any period of time.

O*****r reasons for this financial and ***** ***** were brought about ***** the high account deficits, growth of short-term foreign debt, declining stock markets, corpo***** bankruptcies, and weak banking and financial institutions. In ***** words, there were many mitigating factors that caused the crisis that these countries were seen to be *****, and ***** ***** no one particular thing that could be used when placing blame for the problems that they dealt *****.

However,