| According to economists, there are five principal | | | | had to sell their dollars to buy back their |
| reasons for the East Asian currency Crisis or IMF | | | | currencies. This caused a rapid decline in the |
| of July 1997 that caused a period of economic | | | | foreign exchange reserves. In the second stage |
| unrest and turmoil in Southeast Asian financial | | | | of the crisis, the lower value of the neighboring |
| markets. The countries that were mainly affected | | | | currencies affected other Southeast Asian |
| during the crisis included Thailand, Indonesia, | | | | currencies like Taiwan dollar, South Korean Won, |
| Malaysia, and South Korea. Inadequate foreign | | | | Singaporean Dollar and Hong Kong Dollar. |
| exchange reserves, improper handling of fund | | | | Governments raised the interest rates for the |
| allocations and inadequately developed financial | | | | purpose of defending the local currency and |
| sectors in the developing Asian countries have | | | | inviting foreign capital. Due to the rapid decline in |
| been held as the prime reasons for the drop in | | | | the economy, investors started removing their |
| the local currency exchange rates against the US | | | | investments from the markets, thereby initiating |
| dollar during the period. | | | | a fall in the stock prices. IMF with the assistance |
| The entire episode of economy crisis started due | | | | of World Bank and Asian Development Bank |
| to inappropriate speculations. Speculators | | | | arranged support packages of around $120 billion |
| forecasted a decline in international market | | | | in order to rescue these markets. |
| growth and started selling South East Asian | | | | Certain economists believe that the distorted |
| currencies. With this, there was a currency | | | | macroeconomic policies and the fixed exchange |
| depreciation and sudden drop in the value of Thai | | | | rate of the currency as a major cause for the |
| baht, Malaysian ringgit, Phillipine Peso and | | | | economic crisis in 1997. |
| Indonesian rupiah. Due to this, all these markets | | | | |