1997 Asian financial crisis

financial crisis in many East/Southeast Asian countries starting in 1997

The Asian financial crisis was a period of financial crisis. It gripped much of Asia beginning in July 1997.

The countries most affected by the 1997 Asian financial crisis.



Currency pegs and fixed exchange rates: Many Asian countries, including Thailand, South Korea, and Indonesia, had fixed exchange rate regimes or money pegs to the U.S. dollar. This made their currencies vulnerable to speculative attack.[1]

 Rapid capital inflows and excessive borrowing: Asian economies experienced a surge in capital inflows and relied heavily on foreign borrowing, leading to over-investment and unsustainable levels of debt [2]

 Weak financial systems and corporate governance: short financial regulations, weak banking sectors, and poor corporate governance practices exacerbated the vulnerabilities in the affected economies



Money reduction: Many Asian currencies experienced significant devaluations, leading to a sharp decline in the value of assets and increased debt burdens for companies with foreign currency liabilities

 Financial sector failures: Banks and financial institutions faced insolvency and encountered difficulties in meeting their duty, contributing to a severe banking crisis in the region [3]

 Economic contraction and social impact: The crisis resulted in severe economic contractions, rising unemployment, and social hardships, including increased poverty rates and social unrest in some countries [4]

IMF role


International Monetary Fund (IMF) assistance and conditionality: The IMF provided financial assistance to the affected countries, often in exchange for implementing structural reforms, fiscal austerity measures, and financial sector reforms.[5]



Mahathir Mohamad was the Prime Minister of Malaysia during the 1997 Asian financial crisis. He took several steps to stabilize Malaysia's economy. This included implementing capital controls to prevent money from leaving the country too quickly, and also introducing stimulus packages to support businesses and the people. It helped Malaysia recover quickly from the crisis, faster than other affected countries.


  1. Christiano, Lawrence; Gust, Christopher (April 2000). "The Expectations Trap Hypothesis". Working Paper (Federal Reserve Bank of Cleveland). doi:10.26509/frbc-wp-200004. ISSN 2573-7953.
  2. "What happened to Asia?". web.mit.edu. Retrieved 2023-05-30.
  3. "Finance and Development". Finance and Development | F&D. Retrieved 2023-05-30.
  4. "Asian Financial Crisis: Causes, Response, Lessons Learned". Investopedia. Retrieved 2023-05-30.
  5. "The Asian Crisis: A View from the IMF--Address by Stanley Fischer". IMF. Retrieved 2023-05-30.



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