During the mid-1990s in Asia, the government could rely on the households during financial stress, because of the high saving rate. Furthermore, Governments had strong fiscal positions, on account of private borrowings. Investments were safe, also as a result of the currencies which were quasi-pegged to the dollar. To sum up all, aforementioned conditions it seemed that Asian countries will never have financial crises. But there was one huge flaw in Asia’s exchange rate pegs against the dollar, which were often implicit rather than explicit (cit).According to Pesenti, Corsetti and Roubini the problem was caused in Asia during the process of financial markets liberalization in the 1990s. This was shown three different, but strictly interconnected dimensions at the corporate, financial and international level. (Corsetti, Pesenti, & Roubini, 1999) At the corporate level, political aims were focused to maintain high rates of economic growth, this led to a long tradition of public guarantees to private projects, some of which were subsidized and taken by the government. On top of that, the government was aimed attention to intervene in favor of troubled firms, markets were under impression that the return on investment was “insured” against contrary shocks. This led to beliefs which created an impression that they had a sustained process of capital accumulation, as a result they got current account deficits. Despite the before-mentioned fact, investment rates and capital inflows in Asia remained high, this was caused by the interest rate fall in industrial countries, therefore it lowered the cost of capital for firms and it encouraged large financial flows into the Asian countries. At the international dimension the problem was provoked by the behavior of international banks, which lent large amounts of funds to the region, banks apparently neglected risk assessment. To point out, this overlanding syndrome might be effectively guaranteed by a direct government intervention in favor of the financial debtors, or by indirect bail-out through IMF support programs. The long-term stagnation of the Japanese economy in 1990s created grounds for the export slowdown from Asian countries. Consequently, a sudden decline in economic activity was quite obvious, because of the reason that trade fluctuations. Moreover, Currency issues, such as Dollar relativeness to the Japanese yen and the European currencies since the 1995s worsened cost-competitiveness in the Asian countries, because of the motive that most of the Asian currencies were pegged to the dollar. (Corsetti, Pesenti, & Roubini, 1999)  Corsetti, Penseti and Roubini described in their work Thailand and Malaysia as the largest and most persistent account imbalances, the justification of the argument is deficits for over a decade in both states. As specified by “NIA data in Thailand the current account was over 6% of GDP in the 1990s and approached 9% of GDP in 1995 and 1996, the same happened in Malaysia, the deficit was above 10% of GDP in 1993 while falling to 3.7% of GDP in 1996.” (Corsetti, Pesenti, & Roubini, 1999)  In Thailand the government tried to fix currency rate, nevertheless, it suffered huge losses on foreign exchange intervention. After that, Korea, Indonesia and Thailand were forced to go to the international monetary fund, even help from IMF was not enough to tackle deep recessions and huge currency depreciations.  For example Thailand got a rescue package of 16.7 $ Billion from multilateral and bilateral sources on 28 July 1997.  (Hong Kong Institute of Economics and Business Strategy, 2000) Despite this, Thailand couldn’t manage to fix economic problems, because of political uncertainty and the government’s ability to carry out the policy actions, which were prescribed by IMF.  Malaysia’s total Foreign debt in mid-1997 was 28.8$ Billion. (Hong Kong Institute of Economics and Business Strategy, 2000) difference between Malaysia and Thailand is that, the government in Malaysia was willing to deal with the crisis and to tackle the weaknesses in the economic structure. The Government reduced government expenditure by 18%, it tightened bank credit. Another argument of Malaysia is that the government tried to create its own austerity program. The government’s intention was to merge 39 finance companies into 5 large companies, besides this the government announced that banks would not bail out failing businesses.  Malaysia’s government tried to fix the exchange rate at ringgit 38 to 1 $, it required central bank approval for currency conversions and demanded foreign investments to remain in the country for at least 1 year. As a result, the controls were lifted in February 1999. Confirming to Corsetti, Penseti and Roubini, Some commentators argued that the fiscal policy necessities required by IMF were unnecessary, harmful and strict. The difference between past crises, which was intervened by IMF and Asian Crisis is that, there were running low budget deficits or fiscal surpluses, which were carrying a nature of relatively low ratios of public debt to GDP. What is more, from some observer’s opinions, IMF may have been too slow in revising the approaches to fiscal policy in the crisis countries. The argument is strengthened by the condition that “the recessions rapidly materialized in the course of 1998 that the IMF progressively loosened its fiscal conditions to allow for cyclically-adjusted fiscal deficits”. (Corsetti, Pesenti, & Roubini, 1999) Therefore, it can be said that both commentators/ Economists were right at the end because IMF’s intervention was not effective to fix the problems and this was a cause of unnecessary, strict and harmful measures taken lately by IMF. It will be discussed and analyzed what was done by IMF in several countries. As it was already mentioned IMF used the programs which were already used in Mexico between 1994 and 1995, but this does not create hopes for the condition that this would succeed in Asian case. For instance, in Thailand IMF created a financial sector reform, which closed nonviable financial institutions and it recapitalized the banking system, the main concern in this action was that this approach could encourage confidence in the banking sector, at the end it had to create healthier banks. it increased VAT tax rate from 7 % to 10% by intervening in Fiscal policy in order to achieve 1 % GDP surplus in 1997 and 1998. Interest rates were raised.In case of Indonesia IMF conducted financial sector reform- the same has happened in Thailand nonviable institutions were closed (60 small banks) state banks were merged. IMF liberalized foreign trade and investment, it eliminated domestic monopolies and expanded privatization program. In a frame of Fiscal policy IMF rescheduled state-enterprise projects and it controlled electricity and Diesel prices. (Hong Kong Institute of Economics and Business Strategy, 2000) As an outcome, it needs to be pointed out that, IMF pledged over US$110 billion in total. Nevertheless, exchange rates continued to depreciate sharply, Equity prices continued to fall harshly despite IMF intervention, for illustration, in Thailand equity prices had fallen by 70% and by 80% in Indonesia and by 60% in Korea. On top of that Massive capital outflows were reflected from the banking sector, the worst conditions in 1998 as a matter of GDP growth in 1998 was -10% for Thailand , -13.7 % for Indonesia. (Hong Kong Institute of Economics and Business Strategy, 2000) it is quite obvious that these two states, suffered the most.IMF was criticized by Martin Feldstein in his work, that it was moving beyond its traditional macro-adjustment related areas of competence such as monetary and fiscal tasks, This idea created controversy, as an counter-argument Stanley Fischer argued that Asian crisis  was caused by structural problems rather than macroeconomic imbalances. From one’s point of view this was the right one, because of the motive that Bank supervision was poor and a relation among governments, banks and corporations were unclear. (Corsetti, Pesenti, & Roubini, 1999)

Asian Countries implemented financial reforms in order to get over with the requirements of accelerated economic growth, time by time it was found out that these countries had flaws in regulatory and supervisor areas, as it was already mentioned. As stated by the World Bank’s report most of the specific areas did not meet international standards, these areas include: “low capital-adequacy ratios, weak legal lending limits on single borrowers or borrowing groups, loose asset classification systems and provisioning rules for possible losses and inadequate disclosure requirements”. (Hong Kong Institute of Economics and Business Strategy, 2000) In case of Capital adequacy ratio, it can be said that it is used to protect depositors and create grounds for stability and effectiveness of financial systems around the world. Therefore it can be analyzed that banks were not capable of absorbing a reasonable amount of losses before losing depositors’ funds. (Investopedia, 2017)  Loose classification system indicates that these countries suffered from aligning assets into groups, also asset classification is based on time such as, current assets, which will be used in one year and long-term assets. ( Bragg, 2013) As it is stated before those states suffered from lots of flaws, because of this reason financial sector was lagging. 

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