|ASIAN ECONOMIC TURMOIL|
The Fallout of the Yamaichi Collapse
December 8, 1997
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Questions answered in this forum:
Won't this have a negative impact on the U.S. economy? What signs will indicate improvement? Why does Singapore seem more stable? What is the IMF and how does it work? How would an Asian Monetary Fund affect economic and political dynamics?
Tanya Connors of Chicago, IL asks:
There was talk during the APEC conference of an Asian Monetary Fund. How would that affect global economic and political dynamics? Would it have helped the South Koreans avert this latest catastrophe?
Arthur Alexander responds:
The Japanese proposal for an Asian Monetary Fund ran into opposition from the United States for economic and political reasons. On the economic side, American officials feared that the managers of the fund would place insufficient weight on the recipients to restructure their economies and to deal with the root causes of their problems. This lack of tough conditions, they believed, would simply encourage countries in their bad behavior. Also, there was a suspicion that this was an attempt by the Japanese government to bail out their banks from their bad loan exposure in Asia.
Politically, the U.S. government felt that an Asian-dominated fund would reduce the authority of the United States in the region. Also, officials worried about the effect on the multilateral institutions like the World Bank and the IMF.
The combination of beliefs -- ineffectiveness of the fund and its weakening of American regional power -- led to strong American opposition and its eventual demise
Nariman Behravesh responds:In the Manila conference right before the APEC meeting in Vancouver, the Asian countries finally gave up on the idea of an Asian Monetary Fund. A number of countries in the region were hoping for an Asian fund that would have fewer strings attached to it than IMF money.
This would have been a very bad idea because it would have encouraged the Asian countries to postpone the painful restructuring that is so badly needed in the region. In the end, with a lot of pressure from the U.S., the Asian countries agreed to put more resources into the IMF instead.
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