One of the key features of the Asian financial crisis was the sharp decline in stock prices and real estate prices in 10 countries at more or less the same time. A second feature was that the foreign exchange values of eight of the currencies of these countries declined and in some cases sharply; the currencies of the other two countries remained pegged to the U.S. dollar. A third feature was the large losses incurred by the banks headquartered in these countries; many if not most of these banks would have been bankrupt if they had been required to apply a “mark-to-market” valuation to their assets. Despite these losses, there were very few runs on these banks, because in effect they had been informally “nationalized” and became wards of their governments waiting for a more formal recapitalization.
KeywordsIncome Explosive Argentina Indonesia
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