Question

Were there elements of these economies which allowed the economies to develop and grow during the asian economic miracle that also conteibuted directly to the asian financial crisis?

Answer 1

The economies of South Korea ,Taiwan,Singapore and Hong Kong are known as the four Asian Tigers. Prior to 1997 crisis the growth of these four economies were commonly referred to as the Asian Miracle.During Asian Miracle there were rapid industralization and rapid development of less developed asian economies in to more developed and more sophisticated societies.During the period of Asian Miracle the four economies were triggered with more exports and industralization. These four economies were resilient enough to overcome the Asian financial crisis of 1997.

Some of the factors that contributed to the Asian Miracle also attributed to the Asian financial crisis in 1997.One of the major factor that contributed to the financial crisis in 1997 was the flaws of financial liberalisation that took place during the period of Asian Miracle.Liberalisation in the presence of a pegged exchange rate regime which led to overhang of unhedged foreign currency was one of the reason for financial crisis.Weakening of Japanese banks also triggered financial crisis in Asia.Japanese banks were large lender of Asia and larger creditor of Japan.There were destabilizing capital outflows and the devaluation and further loss of confidence.Some of the major factors are 1)Foreign debt to GDP increased from 100 % to 167%:As a consequence of Asian miracle the four tigers attracted more capital inflows from the developed countries.2)Huge current account deficits on Thailand,Infonesia and South Korea .These countries had more imports than the exports .3.Over -exuberance was another major facto that contibute to financial crisis.During the Asian miracle there was high boom in the Asian economy and it was a period of high economic development.Due to this high boom period there was expensive borrowing by firms.