August 7, 2007
For Immediate Release: August 7, 2007
Contact: Dan Beeton, (202) 293-5380 x104
Washington, D.C.: The Center for Economic and Policy Research (CEPR) is pleased to announce the release of the article, “Ten Years After: The Lasting Impact of the Asian Financial Crisis” by CEPR economist and Co-Director, Mark Weisbrot. This article, released 10 years after the beginnings of the Asian Financial Crisis in July 1997, will be published in a forthcoming book from the Woodrow Wilson International Center for Scholars. The article’s release also comes just before the August 14 10-year anniversary of the collapse of the Indonesian economy – a central focus of the regional crisis.
The article argues that the most important long-term impact of the East Asian financial crisis, a decade later, has been that it began a process that led to the collapse of the International Monetary Fund’s (IMF's) influence over middle-income countries. This was partly a result of the Fund's role in the crisis, detailed in the article, which was widely seen as a major failure.
“Partly as a result of their experience with the crisis, middle-income Asian countries sought to remove themselves from the IMF’s influence by accumulating large reserve holdings,” said Weisbrot, who is Co-Director of CEPR. “The IMF's authority and credibility was further undermined in the Argentine crisis of 1998-2003, and in recent years the availability of alternative sources of credit, especially in Latin America, has led to the collapse of the IMF's influence in that region and among middle-income countries generally.”
The author argues that this is the most important change in the international financial system since the breakdown of the Bretton Woods system in 1973. He also concludes that for the foreseeable future, any positive financial reforms will be made at the national and regional level – for example, with the extension of such arrangements as the Chiang Mai Initiative of bilateral debt-swaps. This is because the high-income countries are not significantly closer to supporting reforms at the level of the international financial system or institutions than they were a decade ago. It will also be important for low-income countries, where the IMF still retains its role as "gatekeeper" for official credit, to become independent from the Fund so they can pursue more effective macroeconomic and development policies and address urgent humanitarian needs.