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Mr. V. Sundararajan and Tomás J.T. Baliño

Abstract

This chapter examines recent experiences with banking crises in seven countries—Argentina, Chile, Malaysia, Philippines, Spain, Thailand, and Uruguay—focusing on the linkages between macroeconomic conditions, financial sector reforms and financial crisis, and the range and effectiveness of measures to deal with financial crises.1

R. B J and V. S

Abstract

The papers in this volume illustrate the structural linkages among different components of financial sector reforms and the impact of these reforms on macroeconomic performance, based on country experiences. An underlying theme throughout the volume is that specific financial sector reforms should be properly sequenced and coordinated in order to complement and support macrostabilization objectives, and to reflect the technical linkages among various components of financial sector reform. An appropriate sequencing of financial sector reforms that supports stabilization can help to derive the full benefits of these reforms in terms of efficiency and growth. The book is therefore concerned with the elements that contribute to orderly liberalizations of financial systems, and with avoiding the pitfalls from inappropriately sequenced or insufficiently supported financial reforms.

International Monetary Fund. Asia and Pacific Dept

Abstract

Asia has achieved remarkable economic success over the past five decades. Hundreds of millions of people have been lifted out of poverty, and successive waves of economies have made the transition to middle-income and even advanced-economy status. And whereas the region used to be almost entirely dependent on foreign know-how, several of its economies are now on the cutting edge of technological advance. Even more striking, all of this has happened within just a couple of generations, the product of a winning mix of integration with the global economy via trade and foreign direct investment (FDI), high savings rates, large investments in human and physical capital, and sound macroeconomic policies.

International Monetary Fund. Asia and Pacific Dept

Abstract

The global expansion that began two years ago appears to have peaked and become less synchronized across economies. While economic activity moderated in advanced economies during the first half of 2018 compared to 2017, it remained steady in most emerging economies (Figure 1). Growth was lower than expected in the euro area, Japan, and the United Kingdom. Meanwhile, in the United States, domestic demand continued to be buoyant, underpinned by low unemployment and a historically large, temporary fiscal expansion. Among emerging market economies, growth remained strong in emerging Asia but weakened in Argentina, Brazil, and Turkey. Several downside risks highlighted in the April 2018 World Economic Outlook (WEO) have increased or partially materialized, such as rising trade tensions and capital outflows from emerging economies with weaker fundamentals. With this more mixed global growth picture, there are already signs that trade is slowing.

Tomás J. T. Baliño

Abstract

In March 1980, one of the largest private banks in Argentina—Banco de Intercambio Regional (BIR)—failed; within a few days, the Central Bank had to intervene three other major banks, two of which were subsequently liquidated.2 Thus began a serious crisis of the Argentine financial system, which resulted in the liquidation of 71 financial institutions over the next two years and caused far-reaching changes not only in the financial system but also in economic policies. The restructuring process is still continuing. Most of the authors who have analyzed these developments have concentrated on the broad macroeconomic aspects; a few others have dealt with selected features of the Argentine financial sector in the context of the crisis. This chapter integrates these two sets of analyses and focuses more closely on the financial sector by emphasizing the regulatory aspects that previous studies have largely ignored.

Andrés Velasco

Abstract

In the mid-1970s, the Government of Chile undertook a comprehensive program of economic liberalization. A central component of this program, particularly after 1977, was a drastic overhaul and deregulation of the country’s financial system. This reform was carried out in the spirit of the well-known McKinnon-Shaw prescription that abolishing “financial repression” is essential for sustained economic development (McKinnon, 1973; Shaw, 1973): banks were privatized, regulations were relaxed, interest rate ceilings were abolished, and integration with world capital markets was increased. The financial reform was accompanied by stabilization policies aimed at reducing the persistent macroeconomic disequilibrium, which was reflected particularly in hyperinflation during the early 1970s.

International Monetary Fund. Asia and Pacific Dept

Abstract

Asia’s heavy reliance on trade in general, and its integration in global value chains in particular, have been critical elements behind the region’s stellar growth record. But rising income levels and wages in the region combined with a less buoyant medium-term outlook in advanced economies suggest the need for Asia to reconsider its growth model, currently oriented toward meeting final demand in other regions (IMF 2016, Mano 2016). In addition, China has not exited labor-intensive light manufacturing sectors as quickly as Korea and Japan did in earlier eras, possibly limiting opportunities for the next wave of Asian developing economies and again suggesting the need for a new model (Mathai and others 2016). Finally, the secular decline in manufacturing’s share in employment combined with the fast rise in automation (for example, robotics), also points to a needed shift toward tradable services (IMF 2018e).

Mr. Jean-Claude Nascimento

Abstract

Between 1981 and the middle of 1987, the Philippine economy faced a major crisis in the financial sector. Three commercial banks, 128 rural banks, and 32 thrift institutions failed, and 2 other private banks were under intervention. In addition, the biggest commercial bank, the Philippines National Bank, and the Development Bank of the Philippines, both government owned, became de facto insolvent and, in 1986, were bailed out by a transfer of their nonperforming assets (about ₱ 108 billion, equivalent to 80 percent of their combined assets) to the Asset Privatization Trust (APT), specially constituted to administer problem assets. The crisis began on a limited scale during 1980 and 1981 and intensified thereafter, culminating by the end of September 1986 in a significant contraction of the financial system (excluding the Central Bank of the Philippines—CBP). For the purpose of analysis, three distinct phases of the crisis have been identified.

International Monetary Fund. Asia and Pacific Dept

Abstract

The April 2017 Regional Economic Outlook: Asia and Pacific documented that productivity growth in a number of economies in Asia—just as in the rest of the world—slowed after the global financial crisis, and that this slowdown was most severe in the region’s advanced economies and in China (Figure 11). In addition, the slowdown was not a temporary phenomenon, but rather has persisted and even become the “new normal” in some economies. IMF (2018c), the third background paper to this Regional Economic Outlook, complements the earlier analysis, which was based on national accounts data, by examining firm-level data from the Orbis data set for six advanced and emerging market Asian economies for which sufficient data are available (China, Japan, Korea, Malaysia, the Philippines, and Thailand), during the period 2003–15.