Summary
Beginning in July 1997 with the collapse of the Thai baht, the Asian Financial Crisis spread rapidly across East and Southeast Asia, triggering currency crashes, stock-market collapses, and banking failures. As highly leveraged financial systems unwound suddenly, the shock propagated internationally through global capital flows and trade networks.
Systemic Features
- Financial fragility & leverage: heavy short-term foreign debt + weak regulation meant small shocks amplified rapidly.
- Tight coupling of emerging markets via capital flows enabled contagion, spreading far beyond initial failure.
- External conditionality & IMF intervention exposed tensions between financial policy, social systems and governance.
- Crisis became political: toppled governments, triggered protests, and reshaped economic policy in the region.
Cascading Systems Affected
- Finance → banking → currency markets → trade flows
- Government stability & public trust
- Corporate employment systems & labour markets
- Poverty, welfare, and social systems
Impacts
- Deep recessions across multiple Asian economies
- Severe unemployment, social unrest, and collapse of businesses
- Structural reforms reshaped economies (privatisation, deregulation, IMF restructuring)
- Demonstrated the speed & magnitude of global systemic financial contagion
Further Reading / Sources
- IMF Crisis Overview
- World Bank analysis of contagion mechanics
- Retrospective academic studies on systemic risk & globalization