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Was the Asian crisis a wake-up call?

Digging deeper into the self-protection rationale for holding reserves, this paper examines the empirical link between reserve holding patterns and crisis vulnerability, comparing the pre- and post-Asian crisis periods, and across different groups of deve
by

yan jing

on 9 June 2010

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Transcript of Was the Asian crisis a wake-up call?

Was the Asian crisis
a wake-up call?


Yan Jing and Guo Huihui Why we should analysis the crisis?

banks close down
industry depression
globle stocks frustrated
Bankruptcy continuous
Decline in employment
Reduce expenditure
banks close down industry depression globle stocks frustrated Decline in employment Reduce expenditure the great effect
of the crisis Introduction the aim to study this thesis is to better know the crisis
and find way to protect themselves against the vicissitudes
of the international capital markerts Findings

The economics crisis happened in the past around the world in 1929 Oct.
U.S. stock market
crash in 1987 Oct.
Wall Street's
"Black Monday" ............1929s.........................................................1987s.......................................................1997-1998..........................................2008s.......................... 1997 Asian financial
crisis 2008 U.S. subprime mortgage crisis The key empirical questions are follows:
Are developing countries self-protectingmore
after the Asian crisis, compared to before the crisis? whether the crisis served as a "Wake-up call" for the developing country policymaker? there are two possible aspects of this effect: one applying to developing countries more generally, and
another to some developing countries in particular. Are especially vulnerable countries self-protecting more when compared to developing countries more generally? One way to test for this would be to show whether
certain developing country groups have different
reserve holding elasticities with respect to a set
of vulnerability indicators. Is China’s reserve holding strategy exceptional when compared to other developing countries? Data and empirical methodology panel data for 51 developing
countries during the period 1982–2004 is drawn from the World Development Indicators database of theWorld Bank. Three main regression models:
all of which included indicators of economic openness and financial development as well as a money supply variable.
The first model included variables to reflect foreign exchange intervention, debt service and hot money flows;
the second included variables to reflect foreign exchange intervention, the current account and total external liabilities;
the third included variables to reflect real exchange rate volatility, debt service and hot money flows. Regression results and analysis several caveats:
1.a proxy indicator for the cost of holding
reserves was not included
2.the analysis herein, like most studies in this area,
is not general equilibrium in nature
3.there is as yet no unified theory of reserve
holding behavior Guo Huihui Yan Jing Thank you! Any questions? Conclusion
1.This paper finds some evidence of a
wake-up call in reserve holding for developing
countries broadly.
2.There also appears to be evidence of distinct
reserve holding patterns across developing country groups.
3.This paper finds no evidence that China’s reserve
holding pattern is significantly different from that of other developing countries.
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