Past Crisis Experiences and its Lessons for Asia
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Past Crisis Experiences and its Lessons for Asia Pierre L. Siklos Viessmann Centre & BSIA
description
Past Crisis Experiences and its Lessons for Asia. Pierre L. Siklos Viessmann Centre & BSIA. The Backdrop I. The Asian crisis of 1997-98 continues to leave its mark Most noticeable in the rise of foreign exchange reserves …but impact outside Asia-Pacific region limited. The Backdrop II. - PowerPoint PPT Presentation
Transcript of Past Crisis Experiences and its Lessons for Asia
Past Crisis Experiences and its Lessons for Asia
Pierre L. SiklosViessmann Centre & BSIA
The Backdrop I
• The Asian crisis of 1997-98 continues to leave its mark– Most noticeable in the rise of foreign exchange
reserves– …but impact outside Asia-Pacific region limited
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China
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Hong Kong
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Indonesia
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India
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Korea
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Malaysia
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New Zealand
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Philippines
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Singapore
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Malaysia
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Thailand
The Backdrop II
• Financial crises in the US and the € area continue to this day 5 years after it first appeared in the US, 2 years after it erupted in Europe. – Its impact has been global– Raised the question of coupling/de-coupling of business
cycles
Region 1980-2010 ‘Crises’ Years
ASEAN 5.16 (3.12) 2.50 (5.61)
CEE 2.61 (3.09) 2.80 (3.31)
China 10.03 (2.81) 10.07 (2.19)
EU 1.97 (1.58) 1.21 (2.76)
Japan 2.22 (2.51) -0.29 (3.11)
LA 2.86 (2.35) 3.60 (2.91)
ME 3.44 (1.35) 4.15 (1.32)
NIC 6.23 (3.17) 2.96 (4.17)
USA 2.68 (2.04) 1.79 (2.73)
1997-982009-10
Real GDP Growth
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Plot of conditional correlations
USA,ASEAN USA,CEE USA,CHN USA,EUUSA,JAP USA,LA USA,ME USA,NIC
vis-a-vis US
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Plot of conditional correlations
CHN,ASEAN CHN,CEE EU,CHN JAP,CHNLA,CHN ME,CHN NIC,CHN
vis-a-vis China
Implications
• #1– Most crises are regional, only a very few are global– Consequence? Policy responses will be different
• In Asia, focus has been on protection from ‘foreign’ shocks• In the GFC, focus is on regulation, supervision of financial markets,
the role of central banks, and fiscal policy’s impact
Implications
• # 2– Improvements in the ‘delivery’ of monetary policy
(viz., central bank transparency) did not prevent the crisis, or spillovers around the world, and is therefore insufficient although these improvements exaggerated
• IT economies fare much better
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CENTRAL BANK TRANSPARENCY
Implications
• # 3– Common currency ideal in Asia-Pacific very much
on the back burner. Unlikely to be taken seriously or contemplated in the near future
Lessons for Asia?
• # 1: GFC is yet another failure of international financial institutions (viz., IMF)– This time its not the advice, it’s the capacity ,
inaction, and inability to apply ‘moral suasion’
Lessons for Asia?
• # 2: International policy coordination might help but cannot be left to existing institutions– It needs champion(s). Are there any in Asia?
Lessons for Asia?
• # 3: Exchange rate regimes should not be managed (whenever possible)– Creates distortions, complicates necessary policy
coordination, delays necessary policy responses, not to mention political problems
Lessons for Asia?
• Transparency is a necessary but NOT sufficient conditions in managing crises– There is room for improvement– Sequencing of responses needs to be thought
through (e.g., Europe since 2010)– Otherwise, transparency actually can make a bad
situation worse
