An Introduction To Financial Crises

Crises have been a feature of the financial landscape for hundreds of years. They often appear without warning as the sub-prime mortgage crisis of August 2007 illustrates. A good example of a crisis is provided by the Asian crisis of 1997-98. The 'Dragons' (Hong Kong, Singapore, South Korea, and Taiwan,) and the 'Tigers' (Indonesia, Malaysia, the Philippines, and Thailand) were models of successful economic development. From the early 1950's until the eve of the crisis in 1997, their economies grew at high rates. In 1997 the Thai baht came under sustained pressure and, on July 2, the government stopped defending it. The value of the currency immediately fell 14 percent in the onshore market and 19 percent in the offshore market.