Liberalization, Growth and the Asian Financial Crisis

This book examines the effects of financial liberalization of the more advanced economies in Southeast Asia and analyzes the degree to which emerging and transitional economies in East and South Asia can benefit from this example. The weakness of the banking sector is examined in order to explain the reasons behind the currency crisis and to prescribe policies to avoid a similar episode in the future. Further, the book documents the individual steps taken to liberalize the economies over a period of about 20-30 years in each country. The analyses reveal that liberalization led to high growth in economies undertaking such reforms while unwillingness to take such reforms appear to have led to poor growth and hence low social development. This finding contradicts the common belief that liberalization led to the financial crisis and then to growth collapse. An efficient and liberalized financial sector is an essential precondition for promoting and accelerating economic growth and welfare. Arguments supporting this policy are based on the experience of Southeast Asia economies, particularly the pioneers such as Malaysia, Singapore, Indonesia and Thailand. This las led some less developed countries in East and South Asia to initiate the process of financial sector reforms and to realize the potential benefits of such reforms. The authors analyze the reform process and the lessons to be drawn from the experiences of these economies in their quest for sustained development in East and South Asia.