In 1998, the Federal Reserve Bank of San Francisco (FRBSF) released a report delving into the Asian Economic Crisis. which triggered IMF bailouts for three countries. In it, the FRBSF went over events and circumstances leading up to the crisis. It concluded that “financial sector weaknesses were a major contributor to the recent financial crisis. Such weaknesses appear to reflect the inability of lenders to use business criteria in allocating credit and implicit or explicit government guarantees against risk. This implies that it would be prudent to accompany efforts to spur recovery in East Asia by reforms designed to strengthen the financial system.”
(For a look at the International Monetary Fund’s assessment on the region’s recovery process released in 2000, please click here.)
The Asian Development Bank notes: “Important progress was made in the years after the crisis to put regional financial systems on a more stable footing. Countries established the Chiang Mai Initiative Multilateralization, a region-wide network of swap agreements, and the ASEAN+3 Macroeconomic Research Office, a surveillance unit accompanying the Chiang Mai Initiative Multilateralization. The Asian Bond Markets Initiative supported the development of local currency bond markets in an effort to prevent the renewed buildup of currency and maturity mismatches on regional balance sheets—two major factors behind the 1997 crisis. In recent years, however, Asian financial cooperation has received less attention. What explains this development?”
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