The Asian Financial Crises Essay Example | Topics and Well Written Essays - 1750 words - 1

The Asian Financial Crises - Essay Example The result was a much deeper Crisis than was necessary or inevitable ( Radelet and Sachs, 1998, p 12). † Asian financial crises led to the development of technology or psychology. Also, the availability of credit led to the creation of a leveraged economic environment and led to increases in the prices of assets to a level which the Asian countries could not sustain. The increase in asset prices, at last, collapsed, making companies and individuals fail to meet their debt obligations. If it could not be for the collapsing of the companies and organizations, the Asian countries would be far ahead with developments. The withdrawal of loans by the lenders also played a major role in development in Asian countries. The government of these countries had to implement new strategies that would not lead to declining of the standards of living of the people. They sought to borrow from the IMF and to refund at a certain interest. In addition, the exchange markets were engulfed with foreign currencies, hence depreciation on their currencies. In order to prevent loss of value of their currencies, the Asian country's government raised their interest rates so that they could attract foreign investors. These governments also intervened in the exchange markets by buying the excess currencies in the market at a fixed rate though neither of all these policies was sustained for long. Without the panic and contagion, the Asian countries were so stable and they were to be amongst the leading developed countries in the world. ‘‘ In fact, a socially irrational response in the sense that, without the panic, the situation was reasonably stable - the debt could have been repaid on plausible assumptions about the economic performance of companies, banks, and economies (Wade, 1998, p 2). †