Financial crisis have been one of the most important events in the history of world economics. The two most important crises are the two most recent ones, these are important for number of reasons. The most important one is the scale and cotangent effects of both the crisis and the impact on the world business and economics.
The purpose of the research is to review and examine the academic literature on Current financial crisis and Asian financial crisis and attempts to identify the parallels and differences between the crises and how the lessons learned from the Asian financial crisis could have helped in minimizing the effects of current crisis.
My paper will also try to evaluate the role of governments and leading financial institutions like IMF and World Bank in these contexts. Also try to highlight the effects of these crises on the society or general public by utilizing the latest available economic data.
Furthermore, the study aims to focus on the policies that lead to these financial and economic disasters. Section I of the study will include introduction to both crisis in brief. Section II will outline the main causes. Section III will discuss the role of IMF and World Bank. Section IV will discuss the lessons were drawn from the previous crisis and current crisis and wetter or not they were applied. Sections V will fuscous on the effects of these crises on the world economy by utilizing the data from World Bank and IMF, such as the projections of world economic indicators. In last section, study will try to evaluate and summaries the result of various academic literature
Asian financial crisis took place in 2007. It took place in Thailand when government abandon its local currency Thai Baht because it collapsed under huge speculative pressure. This caused panic amongst the investors of the region. The results were further currency collapses and wider spread capital flight from the region. This capital flight crippled the regional economies. The effects were felt all around globe. These economies were known as "Asian tigers" as they were the fastest growing economies on the planet. The crises was severe enough that even Japanese economy felt prey to it. These economies eventually recovered with help of IMF and other world economic power but the fallout meant that regional economic growth suffered terribly.
In the case of current financial crisis more commonly known as Credit crunch the main cause of the crises was the financial innovation and undervaluation of risk. Current financial crisis started taking shape on February 27, 2007 when Freddie Mac1 in one of its press releases announced that it will no longer buy the most risky sub-prime mortgages. It announced that it will only buy the mortgages with variable interest rates. This event mostly went unnoticed and most people ignored it as domestic U.S. news. They were assured that house prices in U.S. was at all times high and their investments in subprime housing sector and other CDO bonds was safe.
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