IDEAS home Printed from https://ideas.repec.org/a/bla/apacel/v16y2002i1p36-47.html
   My bibliography  Save this article

Crisis Vulnerability

Author

Listed:
  • Peter Warr

Abstract

Earlier attempts to explain the East Asian crisis of 1997 have overemphasised the importance of contagion, missing the central role of vulnerability. According to conventional accounts, Thailand experienced a financial panic due to such factors as corrupt government and corporate practices, inadequately supervised banks and venal currency speculators. Confidence in the Thai currency and banking system collapsed, provoking capital flight, a float of the Thai currency and a drastic decline in its value. This undermined confidence in the prospects of other East Asian countries, also provoking crises there. This article clarifies the concept of vulnerability and demonstrates its relevance by showing the long‐term development of vulnerability in each of the three ‘IMF bail‐out’ countries: Thailand, Indonesia and Korea. By 1996 all three were vulnerable to a currency crisis. Contagion provided the short‐term trigger for the crisis but was not its underlying cause. The policy lesson is to avoid vulnerability, not to attempt to avoid contagion.

Suggested Citation

  • Peter Warr, 2002. "Crisis Vulnerability," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 16(1), pages 36-47, May.
    • Handle: RePEc:bla:apacel:v:16:y:2002:i:1:p:36-47
    DOI: 10.1111/1467-8411.t01-1-00003
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1467-8411.t01-1-00003
    Download Restriction: no
    File URL: https://libkey.io/10.1111/1467-8411.t01-1-00003?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Peter G. Warr, 1999. "What Happened to Thailand?," The World Economy, Wiley Blackwell, vol. 22(5), pages 631-650, July.
    2. Jeffrey D. Sachs & Aaron Tornell & Andrés Velasco, 1996. "Financial Crises in Emerging Markets: The Lessons from 1995," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 147-216.
    3. Ronald I. McKinnon, 1999. "Exchange rate co-ordination for surmounting the East Asian currency crises," Journal of International Development, John Wiley & Sons, Ltd., vol. 11(1), pages 95-106.
    4. Prema‐chandra Athukorala & Peter G. Warr, 2002. "Vulnerability to a Currency Crisis: Lessons from the Asian Experience," The World Economy, Wiley Blackwell, vol. 25(1), pages 33-57, January.
    5. Steven Radelet & Jeffrey D. Sachs, 1998. "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 1-90.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mardi Dungey & Rene Fry & Vance L. Martin, 2006. "Correlation, Contagion, and Asian Evidence," Asian Economic Papers, MIT Press, vol. 5(2), pages 32-72, Spring/Su.
    2. Juthathip Jongwanich, 2006. "Exchange Rate Regimes, Capital Account Opening and Real Exchange Rates: Evidence from Thailand," Departmental Working Papers 2006-01, The Australian National University, Arndt-Corden Department of Economics.
    3. Juthathip Jongwanich, 2008. "Real exchange rate overvaluation and currency crisis: evidence from Thailand," Applied Economics, Taylor & Francis Journals, vol. 40(3), pages 373-382.
    4. Andrew Powell & Pilar Tavella, 2012. "Capital Inflow Surges in Emerging Economies: How Worried Should LAC Be?," Research Department Publications 4782, Inter-American Development Bank, Research Department.
    5. Fernando A. Broner & Guido Lorenzoni & Sergio L. Schmukler, 2013. "Why Do Emerging Economies Borrow Short Term?," Journal of the European Economic Association, European Economic Association, vol. 11, pages 67-100, January.
    6. Coudert, Virginie & Gex, Mathieu, 2008. "Does risk aversion drive financial crises? Testing the predictive power of empirical indicators," Journal of Empirical Finance, Elsevier, vol. 15(2), pages 167-184, March.
    7. Jeffrey A. Frankel & Shang-Jin Wei, 2004. "Managing Macroeconomic Crises," NBER Working Papers 10907, National Bureau of Economic Research, Inc.
    8. Peter Sarlin & Dorina Marghescu, 2011. "Visual predictions of currency crises using self‐organizing maps," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 18(1), pages 15-38, January.
    9. Emerson Fernandes Marcal & Pedro Valls Pereira & Diogenes Manoel Leiva Martin & Wilson Toshiro Nakamura, 2011. "Evaluation of contagion or interdependence in the financial crises of Asia and Latin America, considering the macroeconomic fundamentals," Applied Economics, Taylor & Francis Journals, vol. 43(19), pages 2365-2379.
    10. Ramón Moreno, 2008. "Experiences with Current Account Deficits in Southeast Asia," Central Banking, Analysis, and Economic Policies Book Series, in: Kevin Cowan & Sebastián Edwards & Rodrigo O. Valdés & Norman Loayza (Series Editor) & Klaus Schmidt- (ed.),Current Account and External Financing, edition 1, volume 12, chapter 14, pages 537-582, Central Bank of Chile.
    11. Thomas D. Willett & Ekniti Nitithanprapas & Isriya Nitithanprapas & Sunil Rongala, 2004. "The Asian Crises Reexamined," Asian Economic Papers, MIT Press, vol. 3(3), pages 32-87.
    12. Hong, Kiseok & Tornell, Aaron, 2005. "Recovery from a currency crisis: some stylized facts," Journal of Development Economics, Elsevier, vol. 76(1), pages 71-96, February.
    13. Gerardo Esquivel & Felipe Larrain B., 1999. "Currency Crises: Is Central America Different?," CID Working Papers 26A, Center for International Development at Harvard University.
    14. Pemasiri J Gunawardana & Ramya Hewarathna, 2000. "The Asian Crisis and Australia-East Asia Trade Flows: A Modified Gravity Approach," Working Papers 2000.13, School of Economics, La Trobe University.
    15. Ozan Sula, 2010. "Surges and Sudden Stops of Capital Flows to Emerging Markets," Open Economies Review, Springer, vol. 21(4), pages 589-605, September.
    16. Plasmans, J.E.J., 2001. "Currency Crises and Economic Monetary Cooperation : An Application to South East Asia and Comparison with Mexico, Brazil and Europe," Other publications TiSEM d740e32a-4dff-44ad-ae39-0, Tilburg University, School of Economics and Management.
    17. Concha Betrán & María A. Pons, 2013. "Understanding Spanish Financial crises, 1850-2000: What determined their severity?," Working Papers 0048, European Historical Economics Society (EHES).
    18. Delphine Lahet, 2001. "L'occurrence d'une crise financière dans un modèle de troisième génération," Revue Française d'Économie, Programme National Persée, vol. 16(2), pages 179-206.
    19. Ahmet Çimenoglu & Nurhan Yentürk, 2005. "Effects of International Capital Inflows on the Turkish Economy," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 41(1), pages 90-109, January.
    20. Franz R. Hahn, 1998. "Currency Crises. A Challenge for Economic Theory and Policy," Austrian Economic Quarterly, WIFO, vol. 3(4), pages 183-190, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:apacel:v:16:y:2002:i:1:p:36-47. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://onlinelibrary.wiley.com/journal/14678411 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.