1997-1998 Asian financial crisis Term Paper Example | Topics and Well Written Essays - 3000 words

1997-1998 Asian financial crisis - Term Paper Example Erroneously creditors usually thing the root of the crisis can be found in badly regulated financial systems or mismanaged exchange rates of the borrowing countries. On the other hand the debtor government tries to find financial help to make things easier with the social costs related to the crisis through forgiveness of the debt, new financing or rescheduling. Fortunately, the creditors and debtors are in equal circumstances when it comes to sharing responsibility of bad lending and all the problems do not fall on the borrowing country citizens. In the middle of the Asian crisis Malaysia disputed that the cause of the financial crisis was in growing financial integration and the reiteration might only be eliminated by reforms of the financial system on the international level. Considering the weakness of bargaining position and the will to bear the access to public and private credit flows, the governments of the debtor tend to make some typical adjustments in policy; their explicit lack of financial background is to guarantee this is the case. They might be interested or not in fulfilling all the amount of reforms sought by the institutions of finance such as IMF and creditors. More than that it is quite possible for the governments to show resistance to the reforms due to interest group and composite tension or just due to origin and na ture of political organizations and the overall process of making decisions. Causes of the Crisis. The economy of Thailand displayed a significant rise path for more than ten-year period before the crisis began in 1997. The account deficit at that time slightly exceeded 5% and the high increase gave birth to budget excess for a number of years. Simultaneously, huge capital inflows were piled up along with a differential high interest rate and under the regime of fixed exchange rate, including deregulation