Describe the Asian financial crisis as it unfolds beginning with ...

[CBme]

Describe the Asian financial crisis as it unfolds beginning with the devaluation of the Thai currency in July 1997, followed by the Malaysian, Indonesian and South Korean crises.
 
  As part of your answer, elaborate on the Malaysian response to the crisis versus its troubled neighbors responses.

Question 2

How has the globalization of financial markets affected the way in which countries conduct their economic policies?
 
  What will be an ideal response?

[karlss]

Answer to Question 1

Students should emphasize the relation to the slowdown in their largest industrial neighbor, Japan, and the reliability on large debts denominated in dollars. Malaysia did not turn to the IMF with its austerity plans. Malaysia imposed extensive foreign exchange controls on capital movements.

Answer to Question 2

The globalization of financial markets imparts discipline to national economic policies. In a segmented market, governments may follow bad economic policies and get away with it; since domestic residents are not allowed to invest abroad, a poor domestic economic policy is not punished by corresponding outflows of money. Opening up domestic markets to global competition allows the domestic economy to compete on international markets and will allow money to flow where investment opportunities are best.

[CBme]

Thank you

[karlss]

Happy to help you