LATEST PUBLICATIONS
WP-2019-06
Skills Needs Anticipation (SNA): Workplace Skills and Satisfaction (WSS) Baseline Survey of Select Employers in the Construction Industry
WP-2019-05
Strengthening Multi-employer Bargaining: Policies and Practices (Phase II)
WP-2019-04
Non-Hazardous Activities for Children: The Case of Banana and Sugarcane Supply Chains
WP-2019-03
Strengthening Preparedness for Migrant Worker Reintegration: Thematic Analysis and Local Index Tool Development

LATEST AV MATERIALS
PIDS WB 2021-0905
7th Mindanao Policy Research Forum
PIDS WB 2021-0905
Annual Public Policy Conference Webinar 4: Robust and Healthy Workforce and Closing Program
PIDS WB 2021-0904
Annual Public Policy Conference Webinar 3: Green And Inclusive Recovery
PIDS WB 2021-0903
Annual Public Policy Conference Webinar 2: Ethical Business
Publication Detail
UPSE JR 01: The Macroeconomics of the East Asian Crisis and the Implications of the Crisis for Macroeconomic Theory

In the first part of the paper, I argue that the afflicted East Asian countries' opening up to short -term international capital flows resulted not only in financial vulnerabilities, which have been emphasized as the cause of the crisis, but also in macroeconomic weaknesses that contributed to the eruption of the crisis. These macroeconomic weaknesses are in the form of deteriorating foreign exchange earning capabilities, coupled with overvaluation of the currencies. The overvaluation led to distortion in relative prices that contributed to speculative bubbles. In the second part of the paper, I argue strongly that Keynes’s theories are very relevant to the present crisis. This includes Keynes’s denial of the dichotomy between the real and monetary sectors, and the speculative demand of money and its role in the "liquidity " and "investment" traps. Most important is Keynes' neglected psychological and "animal spirits" factors, which were discussed in Chapter 12 of the General Theory. A rereading of this chapter shows that Keynes's analysis is stronger and more perceptive than the "market failure" analysis of Stiglitz, Rodrik and Krugman in arguing for strong financial regulation and supervision, as well as capital controls for short-term international flows. The monetarist and rational expectations schools of thought are strongly criticized. These schools of thought paradoxically were the theoretical bases for the initial monetary and fiscal austerity measures imposed on the afflicted countries, which deepened and prolonged their crisis. Finally, I also briefly discuss the implications of the crisis on the endogenous growth models and on the economics of institutions and governance.

UP-School of Economics
Authors Keywords
Lim, Joseph Y.; Asian financial crisis;
Download PDF Number of Downloads
Published in 0 and available for NO PDF AVAILABLE Downloaded 0 times since November 25, 2011
×
Please let us know your reason for downloading this publication. May we also ask you to provide additional information that will help us serve you better? Rest assured that your answers will not be shared with any outside parties. It will take you only two minutes to complete the survey. Thank you.


To use as reference:
If others, (Please specify):
Name: (optional)
Email: (required, but will not display)
Age:
Gender:
If Prefer to self-describe, please specify:
Level of Education:
Occupation:
If employed either part-time or full-time, name of office:
If others, (Please specify):
Would you like to receive the SERP-P UPDATES e-newsletter? Yes No
Use the space below if you have any comment about this publication or SERP-P knowledge resources in general.