Edited by Masahiro Kawai, David G. Mayes and Peter Morgan
Chapter 8: Regional Monitoring of Capital Flows and Coordination of Financial Regulation: Stakes and Options for Asia
Michael G. Plummer 8.1 INTRODUCTION The 2007–2009 global financial crisis may have had its origins in the United States (US), but its knock-on effects have pounded Asian economies no less than the US; negative growth rates in a number of Asian economies have been even more pronounced. Such an economic shock has not been seen in Asia since the economic crisis of 1997–1998. And for several economies in the region, the global financial crisis at some point took an even higher toll than did the previous crisis. From an Asian perspective, the main difference between the two crises in terms of policy is arguably that the crisis of 1997–1998 was mostly home-grown, while the global financial crisis was imported. Most Asian economies were conservative in terms of their macroeconomic management prior to the global financial crisis, with relatively low inflation, budget deficits under control, stable exchange rates, high current account surpluses and the build-up of a large cushion of foreign-exchange reserves. Asian economies did not invest heavily in ‘toxic’ assets and other high-risk financial activities. While the ‘savings glut’ hypothesis would assign some blame to Asian economies in terms of the perpetuation of global economic imbalances (Bernanke 2005), ultimately the main responsibility for the crisis lies in the US and other developed economies where the global financial crisis broke. The media places most of the blame for the crisis on unsustainable highrisk assets, such as subprime mortgages, credit-default swaps and mortgagebacked securities, overzealous financial deregulation, and a...
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