Global Financial Crises: Origin and Management

Yıl 2016, Cilt: 6 Sayı: 3, 92 - 98, 01.05.2016

Hock Lye Koh Su Yean Teh Wai Kiat Tan

Öz

The world has witnessed a succession of three global financial crises in the past two decades. During each crisis, many financial institutions failed.
Credit became either unavailable or too costly for business, as seen in the recent financial turmoil in Greece. Similar situation also prevailed during the
1997-1998 Asian Financial Crisis, requiring the International Monetary Fund to rescue Indonesia, Korea and Thailand. A major cause of these crises
is the high levels of sovereign and corporate debts. Central banks were prompted to intervene by the injections of large liquidity with low interest
rates into the financial systems. Cheap liquidity often leads to high asset valuations, a root cause of another future crisis. Cheap liquidity also might
lead to future high inflation and unsustainable sovereign and corporate debts. This paper begins with providing a qualitative-quantitative appraisal of
these three recent financial crises, beginning with the 1997-1998 Asian Financial Crisis, through the 2008 US Great Recession, and the ongoing global
recession. We argue that the 2008 US Great Recession was an inevitable consequence of the action of Asian countries in building sufficient foreign
reserves in an attempt to insulate the country from future external shocks. The 2008 contagious crisis quickly spread to the EU zone and ultimately
worldwide. The paper ends with some suggestions for managing future financial crisis, with particular reference to Asia that entails the formation of
a pan-Asia economic grouping to resolve unending currency issues and other trade related problems, with China and Japan playing the leading role.

Anahtar Kelimeler

Financial Crisis Management, Sovereign Debts