Self-Inflicted Wounds

Their own governments, not the economic system, were to blame for the recent financial crisis in Asian countries.

Issue: Winter 1999-2000

The global financial crisis that began with the collapse of the Thai baht in mid-1997 was fundamentally one of information mismanagement--that is, banks failed and markets collapsed mainly because crucial information was not collected and distributed to investors. Once burned, those same investors have understandably proved reluctant to return to markets where they mistrust the available financial data and, more generally, the credibility of host governments. To lure back investment, armies of financial specialists have been dispatched to Asia by the International Monetary Fund (IMF) and other multilateral institutions to establish basic standards of accounting and disclosure requirements for banks and firms.

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