Marek D¹browski (ed.) The Episodes of Currency Crisis in Latin American and Asian Economies W a r s a w , 20 0 1 No. 39 The views and opinions expressed in this publication reflect Authors’ point of view and not necessarily those of CASE. This paper was prepared for the research project No. 0144/H02/99/17 entitled "Analiza przyczyn i przebiegu kryzysów walutowych w krajach Azji, Ameryki £aciñskiej i Europy Œrodkowo-Wschodniej: wnioski dla Polski i innych krajów transformuj¹cych siê" (Analysis of the Causes and Progress of Currency Crises in Asian, Latin American and CEE Countries: Conclusions for Poland and Other Transi- tion Countries) financed by the State Committee for Scien- tific Research (KBN) in the years 1999–2001. The publication was financed by Rabobank SA Key words: currency crisis, financial crisis, Asian economies Argentina, Mexico,Thailand, Indonesia, South Korea, Malaysia DTP: CeDeWu Sp. z o.o. Graphic Design – Agnieszka Natalia Bury © CASE – Center for Social and Economic Research, Warsaw 2001 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, without prior permission in writing from the author and the CASE Foundation. ISSN 1506-1647 ISBN 83-7178-257-8 Publisher: CASE – Center for Social and Economic Research ul. Sienkiewicza 12, 00-944 Warsaw, Poland e-mail: [email protected] http://www.case.com.pl The Episodes of Currency Crisis in Latin... Contents Introduction by Marek D¹browski . .7 Part I. The Mexican Peso Crisis 1994–1995 by Wojciech Paczyñski . .9 1.1. History of the Crisis . .9 1.2. In Search of the Causes of the Crisis: Macroeconomic Factors . .11 1.2.1. Fiscal Policy . .11 1.2.2. Savings and Investment Balance . .11 1.2.3. Private and Public Debt . .12 1.2.4. Exchange Rate Policy . .14 1.2.5. Monetary Policy . .15 1.2.6. Foreign Trade . .16 1.2.7. Balance of Payments . .16 1.3. In Search of the Causes of the Crisis: Microeconomic Factors . .17 1.4. Political Situation . .17 1.5. Crisis Management . .18 1.6. Conclusions . .19 Appendix: Chronology of the Mexican Crisis . .20 References . .21 Part II. The 1995 Currency Crisis in Argentina by Ma³gorzata Jakubiak . .23 2.1. Introduction . .23 2.2. Overview of Economic Situation Before and During the Crisis . .23 2.2.1. Reforms of the Early 1990s and Crisis Developments . .23 2.2.2. Monetary and Exchange Rate Policy . .24 2.2.3. Fiscal Policy . .25 2.2.4. Private and Public Debt . .25 2.2.5. Savings and Investment . .26 2.2.6. Foreign Trade . .27 2.2.7. Balance of Payments . .27 2.2.8. Real and Nominal Rigidities . .29 2.2.9. Banking System . .29 2.2.10. Domestic Financial Market . .31 2.1.11. Private and Public Sector . .32 2.3. Political Situation and Management of the Crisis . .32 2.4. Post-Crisis Developments . .34 2.5. Conclusions . .35 Appendix: Chronology of the Argentinian Crisis . .36 References . .37 Data Sources . .37 CASE Reports No. 39 3 Marek D¹browski (ed.) Part III. The 1997 Currency Crisis in Thailand by Ma³gorzata Antczak . .39 3..1. Introduction . .39 3.2. The Way to the Crisis . .39 3.2.1. Macroeconoomic Signs of Vulnerability . .41 3.2.2. Microeconoomic Signs of Vulnerability . .42 3.3. The Crisis . .44 3.3.1. Managing the Crisis. The IMF Intervention in Thailand . .44 3.3.2. Macroeconomic Environment after the Crisis . .45 3.4. Conclusions . .47 Appendix: Chronology of the Thailand's Currency Crisis . .52 References . .54 Part IV. The Malaysian Currency Crisis, 1997–1998 by Marcin Sasin . .55 4.1. Overview . .55 4.1.1. Introduction . .55 4.1.2. The Public Sector . .56 4.1.3. Monetary Policy and the Financial Sector . .58 4.1.4. The Corporate Sector . .61 4.1.5. The External Sector . .62 4.2. The Crisis . ..