Asia and the global financial crisis

The global financial crisis of 2007–09 has starkly demonstrated the extent to which the economic fortunes of the United States, Asia, and the rest of the world are intertwined. The crisis was transmitted to industrial and emerging market economies through both financial and trade channels. Investors were affected by exposure to failing assets in the United States and increased uncertainty in global financial markets. Emerging market economies experienced abrupt halts in capital inflows and downward pressure on their exchange rates. Exporters throughout the world saw demand for their products decline. While Asian economies were initially perceived to be insulated from developments elsewhere, the notion of Asia “decoupling” from the problems in the United States and Europe evaporated as the crisis intensified. Policymakers around the world faced the tasks of stabilizing financial conditions and managing economic growth in the short run as well as adopting long-run reforms aimed at preventing future crises.