ABSTRACT
The currency crises in Asia in 1997 highlighted the danger of the fixed exchange rate system. Four ASEAN currencies (the Thai baht, the Malaysian ringgit, the Indonesian rupiah, and the Philippine peso) all depreciated by 30-40 percent in the three months following the baht depreciation of July 2. Thailand asked International Monetary Fund (IMF) for a balance of payment support package in August. The IMF support ($4 billion) was complemented by Japan ($4 billion) and other Asian nations together with theWorld Bank andAsianDevelopment Bank (ADB). In November, Indonesia asked the IMF, the World Bank, and the ADB to advise themoneconomic reform togetherwith a support for a potential balance of payment gap. The Indonesian package by IMF, World Bank, and ADB was also complemented by a secondary line of support by Japan, the United States, and the Asian countries. In late November, Korea, after its currency depreciated sharply, asked for the IMF support. Also in November, the sharp decline in the Hong Kong stock market, which was caused by defending the fixed exchange rate based on the currency board, caused a worldwide turmoil. The crisis spread to Korea in November, and the IMF package was hastily put together in the first week of December. The crises in these countries deepened in December 1997 to January 1998, as the value of the Indonesian rupiah depreciated to a level one-sixth of the precrisis level, and other ASEAN currencies and the Korean won depreciated to a level half of the precrisis level.
