Twenty Years after the Asian Crisis: Financial Development of Four ASEAN Countries

Abstract

The Asian crisis was sudden and unprecedented in its scale. It began as a currency crisis in Thailand but quickly spread to other Southeast Asian countries and almost paralyzed their financial systems, primarily banks and capital markets, then the real economies. Later the crisis was called a crisis of a new type in the globalization era. Four ASEAN countries – Thailand, Malaysia, the Philippines and Indonesia – that had opened their capital accounts too soon found themselves in the epicenter of the crisis. As the crisis was financial by its nature, the above-mentioned countries in postcrisis years tried to promote more sound and efficient domestic financial systems, paid much attention to lessening the sensitivity of domestic economies and financial systems to external shocks, including “sudden stops” in foreign capital inflows, and to building a solid base of domestic investors. The aim of this study is to re-assess the scope of financial development of four Southeast Asian countries that were hit particularly hard during the Asian crisis.