Crisis outbreak
The fixed exchange rate has given a fake sentiment of security in the southeastern Asian countries, (Thailand, South Korea, and Indonesia) this system has encouraged these countries to conclude a huge debt denominated by the U.S. Dollar, in additional to this the exports of these countries were weak in the mid-seventies because of , the high value of the U.S. Dollar against the Japanese yen, on the other hand China devalued its currency in 1994, the huge inward capital flows and the weakness of the exports had reflected on the widening of the deficits in current accounts as well as a significant portion of the inflows were in the form of a short-term loans, which leads these countries to an external distress.
As a result of the currency prices speculation and the declaration of the stock market profits, the monetary policies were disturbed in those markets which led to increase the interest to stop transferring the national currency to other foreign currency especially the U.S. Dollar; moreover, to try to encourage the investors who are biased to the U.S. Dollar to transfer the funds to the national currencies.
Based on that, the interest rate has increased to the extent of 25% in Thailand and 35% in Korea, and it has remained at this level for several days, which forced the investors of these markets to give up their securities and deposit its value in the banks to benefit from the increase in the interest rate. This resulted on the increase of the securities without any purchase offer offset, which led to sharp declining in the stock prices reached to 50-25% comparing to the prevailing market rates.
Thailand: Economy of Thailand
Between the years 1985 to 1996, Thailand's economy has developed and peaked to over...
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...ai Motors took over Kia Motors. Whereas; Samsung Motors' $5 billion venture was liquidated due to the crisis, and eventually Daewoo Motors was sold to the American company General Motors (GM).
The South Korean won, meanwhile, weakened to more than 1,700 per U.S. dollar from around 800. Regardless of the sharp economic drops and the frequent bankruptcies of the corporations, South Korea has managed to triple its per capita GDP in dollar terms since 1997. Indeed, it resumed its role as the world's fastest-growing economy—since 1960, per capita GDP has grown from $80 in ostensible terms to more than $21,000 as of 2007. However, like the chaebol, South Korea's government did not escape unscathed. Its national debt-to-GDP ratio more than doubled (approximately 13% to 30%) as a result of the crisis. In South Korea, the crisis is also commonly referred to as the IMF crisis.
Samsung as a company was founded in 1938 in Korea. 46,500 employees are working at six Samsung Electronics facilities in Korea. Although they are at different locations, all share the same goal and that goal is satisfying global customers by producing a quality product. Here in the U.S. Samsung is a very recognized brand, sitting along side Sony, Panasonic, Phillips, Toshiba, Matsushita and other more know brands of TVs. In South Korea, Samsung was a governmentally subsidized large business until in the 1990’s. In the mid 1990’s one of the most significant threats to Korean corporations was that their major advantage in low labor cost had been deteriorating against the labor costs in many of the competing Southeast Asian countries. The average wage of $1,144 a month that Korean workers earned was one of the highest wages paid in Asia outside of Japan. Korea had been the low cost labor supplier until the point at which The Peoples’ Republic of China entered the competition for manufacturing of color TVs. The low cost of labor in China would cause Korea’s position being the lowest cost provider to be a position that was in danger. The Korean government at this point was discontinuing subsidies and export credits to Korean manufacturers and at this time the Korean products which had been the low end market
The second reason why China came to the forefront of the international finance scene following the East Asian financial crisis is China’s economic performance became the key to the current economic stability of East Asia. During 1997 - 1998, China was the only country in the region to sustain significant growth. In particular, maintaining the stability of the renminbi, was seen as the last hope of achieving equilibrium in the regional currency system and facilitating recovery (Garnaut, 1998). The Chinese government took up the challenge and made a firm commitment not to devalue the renminbi in the short term. China's decision not to devalue in the face of internal pressures has been credited for stabilizing Asia's economic situation.
currency status as a result of the China-US trade relationship. Journal of Global Business and Technology, 10(2), 43-59. Retrieved from Business Source Complete
In September 22, 1985, government of the United States, France, West Germany, Japan, and United Kingdom meet at Plaza Hotel in New York (Okina). The five governments come to an agreement call Plaza Agreement. Governments agree to change the exchange rate of U.S. Dollar. The exchange value of dollar decline and Yen go up (Okina). Due to the Plaza Agreement, much U.S. money started to flow to Japan. During 1985 to 1988, the Yen exchange rate increase and this decrease the competitive strength of Japanese international company (Okina). The Japanese government created policies to help the export industries that were hurt by the inflation of Yen. Interest rate of loaning was reducing to policy that created (Okina). The lower of interest rate did not help the export businesses, but it trigger an investment boom in Japan. Investment toward stock and real estate were rapidly increasing due to the belief that land would not depreciate (Okina). As more land being trade the price of lands started to increase. At the highest point of the price, Tokyo’s land value can compare to the land value ...
The inflation rate of Thailand was the lowest during 1998. From 1997 to 1998, to solve the Asian financi...
Given this context, understanding what truly caused the Korean economic crisis is very important. Without identifying and remedying the fundamental problems, nobody can be sure that Korea will not have the similar kind of economic crisis never again. So, we need to identify what caused the crisis in 1997 and what the Korean government has to do. Therefore, this paper will examine the root cause of Korea's economic crisis in 1997 and present solutions for the stable growth of the Korean economy in the future.
After the Korean War, South Korea remained one of the poorest counties in the world. GDP per capita in 1960 was around $1000, which was lower than any other poor countries like Latin Americas and Africa. However, a huge wind blew in the economy of South Korea. The real GDP of South Korea expanded by averagely 8 percent for many years. The real GDP, $ 2.7 billion in 1962 expanded to $ 230 billion by 1986. By 2007, the real GDP of South Korea reached the trillion dollars. During the period, South Korea became one of the leading countries from one of the poorest countries. People of South Korea call this period the Miracle on Han River
Back in 1997, there was the financial crisis occurred in Asia. Thailand was one of the countries that also got the effect from that incident (This financial crisis was spread around Asia especially Taiwan Indonesia and Malaysia). Thai Baht was astoundingly depreciated from 25 baht per US dollar to 43-48 baht per US dollar. Depreciating of Thai currency also had impact on the external debt of Thailand. External debt of Thailand was increased from 29,300 million US dollar to 82,600 US dollar in 1996 and became 109,300 million US dollar in 1997. 22.5 percent of the External debt was from government and 77.5 percent from private sectors.
...price and devaluation of the domestic currency to bring it back to A from A’ the country has to sell off its Foreign assets.
Thailand implements a controlled floating exchange rate system, pricing to market forces on the Thai baht, and the Thai central bank would only intervene in the market when necessary, in order to avoid excessive exchange rate volatility to the expected impact of economic policies. At present, the global economic slowdown, domestic demand is not good in Thailand. In order to keep the country's export competitiveness, the Bank of Thailand is more inclined to let the baht weaken.
Unfortunately, this is article portrays negative macroeconomics of South Korea. The article discusses the struggle of Korean people. A country with one of the lowest birthrates in the world and on top of that a rapidly aging society. In my belief, the author probably included this article to make sure other countries are aware of situation. The youth unemployment rate is nearly 10 percent. And the country is about 1.19 trillion dollars in debt even if business have taken a portion of it. South Korea is in an economic crisis which their people seem to ignore and tend on looking at the brighter
Southeast Asia financial crisis started in Thailand currency crisis, and Thailand currency crisis has been brewing as early ...
Despite the fact that recent reports have shown that the Chinese currency is currently facing descending pressures, it is, however, likely to improve in the future because of the enhanced terms of trade, current account surplus that is growing, and high net saving. Another reason that will make the Chinese RMB to do well in the future it is because the currency has solid fundamentals and the economy of the country is significantly increasing at a higher rate than the GDP rates. Due to the growing Chinese economy to being the second largest economy, the Chinese currency yuan has been acknowledged by the International Monetary Fund (IMF) as a major global
...y equals the United States. Hence, in this new world of international monetary structure U.S. needs to be very careful about its economic policies or it may lose its dominance over the monetary markets internationally. However, in examining the U.S. economy in the recent past we realize that the trouble has already begun for e.g. The current account deficit jumped by about $100 billion annually during the three-year period 1998-2000, nearing $450 billion or about 4.5 percent of GDP in 2000. The net international investment position of the United States reached a negative $2 trillion at the end of 2000. Hence it is quite possible that in near future the dollar may experience some sharp depreciation, the evidence of which is reflected in the excel sheet attached.
This country is of particular interest as it is one of the four Asian Tiger economies, whose rapid industrialisation and growth between the early 1960’s and 1990’s caused it to emerge as one of the most dynamic and fast-changing countries in Asia and the world. Much like Japan, its economic development was marked by heavy investments in foreign technology and imitation through reverse-engineering. By limiting FDI, South Korea maintained control over its industrial base and encouraged investments in R&D.