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Asian Financial CrisisFinancial Glossary Written by Wikipedia, the free encyclopedia.var sburl8937 = window.location.href; var sbtitle8937 = document.title;var sbtitle8937=encodeURIComponent("Asian Financial Crisis"); var sburl8937=decodeURI("http://www.actionforex.com/financial-glossary/financial-glossary/asian-financial-crisis-20041204325/"); sburl8937=sburl8937.replace(/amp;/g, "");sburl8937=encodeURIComponent(sburl8937);The Asian financial crisis was a financial crisis that started in July 1997 in Thailand, and affected currencies, stock markets, and other asset prices of several Asian countries, many part of the East Asian Tigers. It is also commonly referred to as the Asian Currency Crisis or locally, although inaccurately, as the IMF Crisis.Indonesia, South Korea and Thailand were the countries most affected by the crisis. Malaysia, the Philippines and Hong Kong were also hit by the slump. Mainland China and Taiwan were relatively unaffected. Japan was not affected much by this crisis but was going through its own long-term economic difficulties.HistoryUntil 1996, Asia attracted almost half of total capital inflow to developing countries. However, Thailand, Indonesia and South Korea had large current account deficits and the maintenance of pegged exchange rate encouraged external borrowing and led to excessive exposure to foreign exchange risk in both the financial and corporate sectors.Economists have advanced the impact of Mainland China on the real economy as a contributing factor to the crisis. China had begun to effectively compete with other Asian exporters particularly in the 1990s after the implementation of a number of export-oriented reforms. Most importantly, the Thai and Indonesian currencies were closely tied to the dollar, which was appreciating in the 1990s. Western importers sought cheaper manufactuerers and found them, indeed, in China whose currency was depreciated relative to the dollar.The Asian crisis started in mid-1997 and affected currencies, stock markets, and other asset prices of several South East Asian economies. Triggered by events in Latin America, Western investors lost confidence in securities in East Asia and began to pull money out, creating a snowball effect.Many economists, including Joseph Stiglitz and Jeffrey Sachs, have downplayed the role of the real economy in the crisis compared to the financial markets due to the speed of the crisis. The rapidity with which the crisis happened has prompted Sachs and others to compare it to a classic bank run prompted by a sudden risk shock. Sachs points to strict monetary and fiscal policies implemented by the governments in the wake of the crisis, while Frederic Mishkin points to the role of asymmetric information in the financial markets that led to a "herd mentality" among investors that magnified a relatively small risk in the real economy. The crisis has thus attracted interest from economists interested in market psychology.Thailand