Beyond the Asian Crisis
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Beyond the Asian Crisis

Pathways to Sustainable Growth

Edited by Anis Chowdhury and Iyanatul Islam

As Southeast and Northeast Asia recover from the Asian crisis and return to a state of growth, the authors of this book assess the lessons to be learned from the crisis to achieve sustainable development in the future. While the importance of each factor contributing to the crisis varies from country to country, their collective experience has created unprecedented turmoil in current thinking on development policy.
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Chapter 13: The IMF and the new international financial architecture

Elaine Hutson and Colm Kearney


13. The IMF and the new international financial architecture Elaine Hutson and Colm Kearney INTRODUCTION The world financial system seems to be exhibiting an increasing degree of fragility. At the national level, more than a dozen countries have, during the last decade or so, experienced systemic financial shocks that cost more than 10 per cent of GDP to fix. Even amongst the developed OECD economies, which have well-developed financial and regulatory systems, France, Finland, Japan, Norway, Spain, Sweden and the United States experienced major financial problems. At the international level, the world has witnessed four financial crises of varying degrees of seriousness in the last two decades: the Latin American ‘Southern Cone’ crisis of 1981–2, the European Exchange Rate Mechanism (ERM) crisis of 1992, the Mexican tequila crisis of 1994 and the Asian crisis of 1997–8. The Asian crisis has been the most serious, having not only catastrophic effects on the countries directly involved, but also threatening the systemic stability of the global financial system. The scale of the Asian crisis – amounting to a capital outflow equivalent to 11 per cent of the affected countries’ combined GDP – makes it the worst crisis since the Southern Cone crisis in Latin America, where there was a net private capital outflow of 8 per cent of the combined GDP of Argentina, Brazil and Mexico. It is crucial that we develop an understanding of the causes of these crises, how their occurrence can be minimized, and how they...

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