Volume 9, Issue 4, August 2020, Page: 192-201
Lessons from the Experiences of Currency Crisis, Focused on the Cases of Korea, Argentina, Mexico and Greece
Yongshik Choe, Seoul Business School, Seoul School of Integrated Sciences and Technologies (aSSIST), Seoul, South Korea
Hyun-jung Kim, Seoul Business School, Seoul School of Integrated Sciences and Technologies (aSSIST), Seoul, South Korea
Received: May 31, 2020;       Accepted: Jun. 15, 2020;       Published: Jun. 28, 2020
DOI: 10.11648/j.ijber.20200904.15      View  10      Downloads  9
The currency crisis has happened intermittently in many countries around the world despite numerous studies about it. It might be its reason that the root cause of currency crisis is not clarified clearly yet. The causes well-known are not the root but the phenomena appeared in its developing process. If the root is clarified, the crisis would be prevented in advance. Above all, its resulting economic performance varies greatly from country to country and from time to time, of which reason is due to the differences in economic policies responding to the currency crisis. It is very important to overcome the currency crisis as well to prevent its occurrence because it damages any national economy very much causing economic hardships of its people. In order to prevent and overcome it, it is necessary to investigate its root cause and developing process. And the empirical experiences of the crisis are useful to clarify them. This paper investigates its root cause, economic principle and policy measures to overcome it through case study. In short, the currency crisis has been caused by the economic overheat, leading to a huge deficit of international payment, which has resulted in the soar of exchange rate, causing the depletion of international reserve because of the exchange rate loss which led the capital outflows. And some representative cases of currency crisis are helpful to establish and enact the policy measures to overcome it. If this principle and some cases of the crisis is understood well, it would be possible for any countries, especially for developing countries, to prevent in advance and overcome successfully it. This paper would contribute to the stable growths of developing countries because the root cause of currency crisis, its economic principle, and the policy measures to overcome it are clarified enough.
Currency Crisis, Deficit of International Payment, Depletion of International Reserve, Economic Overheat, Twin Crises
To cite this article
Yongshik Choe, Hyun-jung Kim, Lessons from the Experiences of Currency Crisis, Focused on the Cases of Korea, Argentina, Mexico and Greece, International Journal of Business and Economics Research. Vol. 9, No. 4, 2020, pp. 192-201. doi: 10.11648/j.ijber.20200904.15
Copyright © 2020 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Kaminsky, Graciela L. and Carmen M. Reinhart, The Twin Crises: the causes of banking and balance-of-payments problems, International Finance Discussion Papers 544, Board of Governors of the Federal Reserve System (U.S.) Washington DC, USA, 1999
Kindleberger, Charles P., Manias, Panics, and Crashes, John Wiley & Sons, 1978
Burkart, Oliver and Virginie Coudert, “Leading indicators of currency crises for emerging countries,” Emerging Markets Review, Volume 3, Issue 2, pp. 107-133, June 2002
Candelon, Bertrand, Elena-Ivona Dumitrescu, and Christophe Hurlin, “Currency crisis early warning systems: Why they should be dynamic,” International Journal of Forecasting, Volume 30, Issue 4, pp. 1016-1029, October–December 2014
Franck, Raphael and Schmied, Aurelien, “Predicting Currency Crisis Contagion from East Asia to Russia and Brazil: An Artificial Neural Network Approach,” 2004, https://ssrn.com, Feb. 26, 2020
Feng Yun and WU Chong-Feng, “Research on Currency Crisis Early Warning Systems,” Systems Enging-theory Methodology Application, January 2002
Goldstein, Morris & Philip Turner, “Banking Crises in Emerging Economies: Origins and Policy Options,” BIS Economic Papers NO. 46, October 1996
Kaminsky, G., S. Lizondo and C. Reinhart, “Leading Indicators of Currency Crises,” 1998, https://mpra.ub.uni-muenchen.de/6981/1/MPRA_paper_6981.pdf, Jun 11, 2020
Kaur, Inderjit, “Early Warning System of Currency Crisis: Insights from Global Financial Crisis 2008.” Journal of Applied Economics; Hyderabad Vol. 14, Iss. 1, pp. 69-83, Jan 2015
Kidman, Andrew, “Currency Crisis Early Warning Systems: Robust Adjustments to the Signal-Based Approach,” 2010, http://duke.edu, February 21, 2020
Krugman, P., “A model of balance-of-payments crisis,” Journal of Money Credit and Banking, vol. 11, pp. 311-325, 1979.
Lindgren, Carl-Johan, Gillian Garcia and Matthew I. Saal, Bank Soundness and Macroeconomic Policy, IMF, Washington DC, USA, 1996.
Nag, Ashok K. and Amit Mitra, “Neural Networks and Early Warning Indicators of Currency Crisis,” Reserve Bank of India Occasional Papers, Vol. 20, No. 2, 1999
Obstfeld, M., “Models of currency crisis with self-fulfilling features,” NEBR Working Paper, no. 5285, European Economic Review, 1995
Sevim, Cuneyt, Asil Oztekin, Ozkan Bali, Serkan Gumus, and Erkam Guresen, “Developing an early warning system to predict currency crises,” European Journal of Operational Research, Volume 237, Issue 3, pp. 1095-1104, 16 September 2014
Krugman, Paul and Jeremy Khan, “Saving Asia”, Fortune, September 7, 1998
Flood, R. and P. Garber, “Collapsing exchange-rate regimes: Some linear examples,” Journal of International Economics Volume 17, Issues 1–2, August 1984, Pages 1-13
Feldstein, Martin, “Refocusing the IMF,” Foreign Affairs, Volume 77 No. 2, March/April 1998
Kim, David Deok‐Ki and Jung‐Soo Seo, “Does FDI inflow crowd out domestic investment in Korea?”, Journal of Economic Studies, Vol. 30 No. 6, pp. 605-622, December 2003
Glicka, Reuven and Andrew K. Rose, “Contagion and trade: Why are currency crises regional?”, Journal of International Money and Finance, Volume 18, Issue 4, pp. 603-617, August 1999
Khan, Saleheen and Kwang Woo “Contagion in the stock markets: The Asian financial crisis revisited,” Journal of Asian Economics, Volume 20, Issue 5, pp. 561-569, September 2009
Borensztein, Eduardo and Jong-Wha Lee, “Financial crisis and credit crunch in Korea: evidence from firm-level data”, Journal of Monetary Economics, Volume 49, Issue 4, pp. 853-875, May 2002
Burnside, Craig, Martin Eichenbaum, and Sergio Rebelo, “Prospective Deficits and the Asian Currency Crisis,” Journal of Political Economy, Volume 128, Number 2, February 2020
Choi, Doo-Yull and Yeonho Lee, “Financial Supervision of Merchant Banking Corporations as a Cause of Korea’s Currency Crisis,” The Journal of the Korean Economy, Vol. 7, No. 1 pp. 77-118, Spring 2006
Corsetti, Giancarlo, Paolo Rosenti and Nouriel Roubini, “What caused the Asian currency and financial crisis?”, Japan and the World Economy, Volume 11, Issue 3, pp. 305-373, October 1999
Johnson, Simon, Peter Boone, Alasdair Breach and Eric Friedman, “Corporate governance in the Asian financial crisis”, Journal of Financial Economics, Volume 58, Issues 1–2, pp. 141-186, 2000
Mitton, Todd, “A cross-firm analysis of the impact of corporate governance on the East Asian financial crisis”, Journal of Financial Economics, Volume 64, Issue 2, pp. 215-241, May 2002
Erkens, David H., Mingyi Hung and Pedro Matos, “Corporate governance in the 2007–2008 financial crisis: Evidence from financial institutions worldwide”, Journal of Corporate Finance, Volume 18, Issue 2, pp. 389-411, April 2012
Aebi, Vincent, Gabriele Sabato and Markus Schmid, “Risk management, corporate governance, and bank performance in the financial crisis”, Journal of Banking & Finance, Volume 36, Issue 12, pp. 3213-3226, December 2012
Chang, Ha-Joon, “Korea: The misunderstood crisis,” World Development, Volume 26, Issue 8, pp. 1555-1561, August 1998
Sachs, Jeffrey, “The IMF and the Asian Flu,” The American Prospect, Mar./Apr. 1998
Stiglitz, Joseph, “10 Years After the Asian Crisis, We’re Not Out of the Woods Yet,” Project Syndicate, July 2007.
Rhodes, William R., Banker to the World: Leadership Lessons from the Front Lines of Global Finance, McGraw-Hill, 2011.
Jang, Sun-Deok, “Current Status and Lessons of Financial Reform in Mexico” in Korean, The Korea Institute for International Economic Policy, 1998
Browse journals by subject