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Banking crises in East Asia : The price tag of liberalization?

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  • Banking crises in East Asia
  • Noy, Ilan
  • East-West Center


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Title Banking crises in East Asia
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Sub Title

The price tag of liberalization?

Material Type Reports
Author(English)

Noy, Ilan

Publisher

Honolulu:East-West Center

Date 2005-11
Series Title; No AsiaPacific Issues / 78
Pages 8
Language English
File Type Link
Original Format pdf
Subject Economy < Macroeconomics
Economy < Financial Policy
Holding East-West Center

Abstract

The banking crises that swept through East Asia in 1997-1998 set off dramatic recessions in the affected countries and imposed heavy costs on the domestic taxpayers. Fear of further crises prompted searches for causes and early warning signs. It soon became apparent that liberalization of the domestic financial sectors of the countries in crises contributed to the genesis of these crises, but policymakers, regulators, and economists disagree about the reason for this. Initial scrutiny fell on unregulated international capital flows, but a comprehensive study suggests that liberalization can lead to financial instability either because of insufficient regulation of the financial sector or because of erosion of previously granted monopolies of existing banks. These possibilities suggest varying policy implications for the current state of domestic financial systems in East Asia, including the challenges inherent in opening up China's banking system to foreign competition as mandated in the China-World Trade Organization accession agreement.