ADBI series on Asian Economic Integration and Cooperation
Edited by Masahiro Kawai, David G. Mayes and Peter Morgan
Chapter 1: The Global Financial Crisis and its Implications for Financial Sector Reform and Regulation in Asia
David G. Mayes and Peter J. Morgan 1.1 INTRODUCTION Although Asian countries have done a great deal to improve their resilience to financial shocks, and have come through the global financial crisis of 2007–2009 relatively well as a result of their unpleasant experiences just over a decade ago in the Asian financial crisis, they have not in general been severely tested. In 1997–1998, many countries experienced foreign exchange as well as banking crises. This time, Asian countries in general have both greater foreign exchange reserves and more flexible monetary policies and currency regimes so they can absorb shocks more readily. Nevertheless, the economic consequences of the crisis have been severe, especially in countries such as the Republic of Korea (hereafter Korea) and Japan that are significant exporters of investment and durable consumer goods. Moreover, other countries, which thought they had excellent crisis management systems, have found themselves in severe difficulty. The problems resulting from the recent global crisis have both provided new challenges and advanced the benchmark for international best practice. The purpose of this book is to identify the new lessons that have emerged from the crisis and explore how the resulting policy recommendations might best be implemented in Asia. This chapter provides an overview of the policy analyses and suggestions in the following chapters, which were initially presented at a conference organized by the Asian Development Bank Institute on the implications of the global financial crisis for financial sector reform and regulation in Asia.1 Section 1.2...
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