The Asian Financial Crisis In the 1980s and for most of the 1990s, the entire Asian marketplace was seen as nothing less than a miracle. Business was booming, and economies in the region enjoyed GDP growth rates nearing 10% per year—4 to 5 times the growth rate of the US economy at the time. It began in the ‘80s when foreign investment in Asian countries began to increase. Foreign investors lured by stable governments, the promise of high returns, and currencies that were tightly pegged to the US dollar began throwing money into the ASEAN-5 (Indonesia, Malaysia, the Philippines, Singapore, and Thailand). Excitement in foreign investment like this can greatly help those foreign economies and therefore help the world economy.
Although Thailand sustained high levels of growth for decades, international capital flight triggered an economic crisis that was exacerbated by domestic weaknesses as well as poor reform measures. Furthermore, the Asian Financial Crisis initially became a catalyst for political reform in Thailand, which eventually facilitated the rise of Thaksin Shinawatra. During the rapid transformation from agrarian to an export driven industrialized economy, Thailand was within the top 20 countries with the highest change in GDP per Capita. The World Bank explained the rapid growth sustained over decades as “fundamentally sound development policy.” The “unusually good” macroeconomic management and stable performance “provided the frame work for private investment.” Combined with progressive education and agriculture as well as “effective but carefully limited government activism,” Thailand experienced a reduction of absolute poverty (from 59 percent in 1962 to 9.8 percent in 1994) and a dramatic improvement of basic social ... ... middle of paper ... ...ian, et al. “What to do about Asia.” Business Week.
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its rapid and successful development, China has been exposed under the spotlight all the time. The world economic crisis happened in 2007 not only damaged the economy of America but also the international image. We have seen the vulnerability of American economy and the failing role of taking responsibility for the economic crisis. Simultaneously, as a huge economy, China is the only country recovers in the minimum duration. The recovery of China also contributes to the spring back of regional and global economy.
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The 1990’s marked a period of prolonged economic boom for the United States. (Brunnermeier, 2009, 77-100) Interest rates were low, which increased investments in subprime mortgage loans- made possible through the mechanism of securitisation. The “U.S. housing bubble” grew as inflows of hot money from domestic and overseas investment funds poured into the U.S housing market, which is arguably the main mechanism by which the crisis spread. The inevitable collapse of the housing bubble as those securities commenced in decreasing value, banks in the U.S. and in foreign countries began to fail.