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Assessing the recent Asian economic crises: the role of virtuous and vicious cycles

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  • Aggarwal, Raj

Abstract

This is an analysis of the causes of the late 1997 economic crises in the (until then) strong Asian economies. This paper shows that, although the two proximate causes of this crises seem to be stronger inter-national competition and poorly developed domestic financial systems in Asia, the underlying causes were related more to the virtuous economic and financial cycles in Asia that turned into vicious cycles in 1997. The key determinant of Asian recovery is the reduction in the importance of these positive feedback cycles by reforming Asian domestic financial systems so they are no longer characterized by low disclosure levels, high debt ratios, and high political influence in credit decisions.

Suggested Citation

  • Aggarwal, Raj, 1999. "Assessing the recent Asian economic crises: the role of virtuous and vicious cycles," Journal of World Business, Elsevier, vol. 34(4), pages 392-408, January.
    • Handle: RePEc:eee:worbus:v:34:y:1999:i:4:p:392-408
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    References listed on IDEAS

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    1. Arthur, W Brian, 1989. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, Royal Economic Society, vol. 99(394), pages 116-131, March.
    2. Krueger, Anne O, 1990. "Asian Trade and Growth Lessons," American Economic Review, American Economic Association, vol. 80(2), pages 108-112, May.
    3. Steven Radelet & Jeffrey Sachs, 1998. "The Onset of the East Asian Financial Crisis," NBER Working Papers 6680, National Bureau of Economic Research, Inc.
    4. Ramon Moreno, 1998. "Responding to Asia's crises," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue nov6.
    5. repec:bla:ecorec:v:73:y:1997:i:222:p:201-11 is not listed on IDEAS
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