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1997 Asian Financial Crisis

   

Added on  2020-10-22

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1997 ASIANFINANCIAL CRISIS
1997 Asian Financial Crisis_1
Table of ContentsINTRODUCTION...........................................................................................................................11 Affect of Asian Financial Crisis on Exchange Rate.................................................................12 Impact of Crisis on other markets.............................................................................................33. Explaining how involved countries in crises recovered their economic conditions................4CONCLUSION................................................................................................................................5REFERENCES................................................................................................................................6
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INTRODUCTIONThe 1997 Financial crisis can be referred to period which destabilized the Asian economyultimately affecting the world economy in the last of 1990's. The report attempts to identify theeffects which has been brought by undertaken crisis on the exchange rate of the country. It alsoprovides information about effect which has been carried out by the crisis over the markets ofinvolved countries. Last section in this report will determine how impacted countries have beenable to improve their economic circumstances post crisis. 1 Effect of Asian Financial Crisis on Exchange RateThere can be numerous reason which can be referred to as main cause ofAsian Financialcrisis such as currency exchange rate, interest rate and soaring real estate values. Thus, this crisisis also known as Currency Crisis and “Asian Contagion”. Countries like Thailand, South Korea,Philippines, Malaysia, Indonesia and Singapore were the most badly affected nations due to theeconomic instability occurred in the year 1997. This Crisis started in Thailand when governmentof country formulated various policies to secure its currency from the US dollar due to thisundertaking the currency of country started declining. With the result of this decline there is adecline in stock market of many Asian Countries which in turn affects overall economiccondition of these countries due to reduction in import. Due to this crisis, Currency Market & Stock Market of East Asia devalued by 38% and60% respectively. Further, assets prices and private debt raised resulting into decline in rates ofnational currency. Therefore, the decline in currency of Thailand eventually evaluated currencyof neighbouring nation such as Indonesia, Malaysia and South Korea (Regnier, 2017). Economy of Thailand was growing at faster rate but with the changes in economiccircumstance from 2 July 1997 Thailand baht started declining and reached to its lowest pointwhich is 56 points and as compared to US dollar. Reason behind this reduction is decrease inforeign reserves of the country and which eventually influenced their import in a negativemanner. The decline in the imports reduced revenue and GDP of the economy of Thailand.Change in exchange rate of a countries currency affects demand & supply. For Example- IfThailand is purchasing goods from USA then the payment will be done in dollars, this will resultin paying more of national currency i.e. Baht due to depreciating value of the currency. Further, Exchange Rate of Indonesia is dropped due to replacement of managementfloating rate regime by fixed floating rate. Exchange rate of Rupiah was 11000 rupiah for 1 US1
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