Chapter 9: Singapore in the aftermath of the Asian crisis
Chia Siow Yue INTRODUCTION Since the outbreak of the Asian currency and ﬁnancial crisis (Asian crisis for short) in July 1997, there has been a proliferation of literature examining its causes and eﬀects and the actions and non-actions on the national, regional and international fronts. There is growing consensus that the Asian crisis originated from the capital accounts, triggered by large inﬂows of private and unhedged short-term capital and their sudden and massive reversals. Channels for the regional contagion were trade and ﬁnancial ﬂows and herd behaviour of investors and creditors. The severity of the Asian crisis was aggravated by the coincident downturn of the global electronics cycle (which aﬀected the export performance of several regional economies), asset bubbles and overinvestment in key sectors, structural weaknesses in banking and corporate sectors (particularly weaknesses in prudential regulations and governance) and slow and/or inappropriate policy responses. The East Asian economies are quite heterogeneous in the openness of their capital accounts, size of their foreign reserves in relation to short-term external indebtedness, soundness of their banking and corporate sectors, development of their regulatory and supervisory institutions and practices, and quality of political governance and public economic management. These diﬀerences are reﬂected in the diﬀerential impacts of the Asian crisis. Singapore’s experience with and responses to the Asian crisis makes for an interesting case study. First, Singapore has a very open current account and capital account, yet the impact of the crisis has not been as severe as...
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