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Global Markets and Financial Crises in Asia: Towards a Theory for the 21st Century PDF

266 Pages·2004·2.66 MB·English
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GlobalMarketsand FinancialCrisesinAsia This page intentionally left blank Global Markets and Financial Crises in Asia Towards a Theory for the 21st Century Haider A. Khan UniversityofDenver USA ªHaiderKhan2004 Softcover reprint of the hardcover 1st edition 2004 978-0-333-76076-5 Allrightsreserved.Noreproduction,copyortransmissionofthis publicationmaybemadewithoutwrittenpermission. Noparagraphofthispublicationmaybereproduced,copiedortransmitted savewithwrittenpermissionorinaccordancewiththeprovisionsofthe Copyright,DesignsandPatentsAct1988,orunderthetermsofanylicence permittinglimitedcopyingissuedbytheCopyrightLicensingAgency, 90TottenhamCourtRoad,LondonW1T4LP. Anypersonwhodoesanyunauthorisedactinrelationtothispublication maybeliabletocriminalprosecutionandcivilclaimsfordamages. Theauthorhasassertedhisrighttobeidentified astheauthorofthisworkinaccordancewiththeCopyright, DesignsandPatentsAct1988. Firstpublished2004by PALGRAVEMACMILLAN Houndmills,Basingstoke,HampshireRG216XSand 175FifthAvenue,NewYork,N.Y.10010 Companiesandrepresentativesthroughouttheworld PALGRAVEMACMILLANistheglobalacademicimprintofthePalgrave MacmillandivisionofSt.Martin’sPress,LLCandofPalgraveMacmillanLtd. Macmillan(cid:2)isaregisteredtrademarkintheUnitedStates,UnitedKingdom andothercountries.PalgraveisaregisteredtrademarkintheEuropean Unionandothercountries. ISBN 978-1-349-41404-8 ISBN 978-0-230-00079-7 (eBoo k) DOI 10.1057/9780230000797 Thisbookisprintedonpapersuitableforrecyclingandmadefromfully managedandsustainedforestsources. AcataloguerecordforthisbookisavailablefromtheBritishLibrary. LibraryofCongressCataloging-in-PublicationData Khan,Haider. GlobalmarketsandfinancialcrisesinAsia:towardsatheoryforthe 21stcentury/HaiderA.Khan. p. cm. Includesbibliographicalreferencesandindex. ISBN 978-1-349-41404-8 1. FinancialcrisesAAsia. 2. CapitalmarketAAsia. 3. Monetary policyAAsia. 4. Internationalfinance. 5. GlobalizationAEconomic aspectsAAsia. 6. AsiaAEconomicconditionsA19459 I. Title. HB3808.K532004 3320.0420095Adc22 2003058077 10 9 8 7 6 5 4 3 2 1 13 12 11 10 09 08 07 06 05 04 For Katsuhito Iwai Izumi Otomo Masanori Tanabe and all my teachers the path for teachers of the Good Law led me to an unexpected mountain. (adapted from The Tale of Genji, ‘The floating bridge of dreams’) This page intentionally left blank Contents ListofFigures x ListofTables xi Acknowledgements xiii 1 Introduction:TheMangledMiracleandthe AlchemyofFinance 1 2 TheBeginningoftheCrisis:Thailand 9 Lossofcompetitivenessandcurrencycrisis 14 Appendix2.1: Someeconomicandfinancialindicators forThailand 26 3 TheCrisisSpreads:Indonesia(withArryBasuseno) 27 FinancialrepressionintheearlierperiodinIndonesia 27 FinancialliberalizationinIndonesiaduringthe1980s 37 Thereformspromisedarosegarden,but... 39 Appendix3.1: Afinancial-structuralmodelof liberalization 45 4 TheEndoftheSouthKoreanMiracle 60 Preludetothecrisis:financialliberalizationand investmentgrowth 60 Thecrisisunfolds 65 Growthandinflation 67 Currentaccount,exchangerateandexternalliabilities 68 Microeconomics:thefinancialmarket’sexpectation ofthecrisis 73 5 FinanceinaComplexCapitalistEconomy:Failures ofGlobalMarketsandDevelopmentalStates 76 1 TheAsianfinancialcrisisandtheAsianmodelof development 76 2 ThefailureoftheAsianmodel,theglobalmarkets andthedevelopmentalstates 79 3 Apath-dependentaccountofTaiwan’sdevelopment intoacomplexeconomy:ashortfinancialeconomic historythroughthe1980sandearly1990s 81 vii viii Contents 6 CorporateGovernance:aNewTheoryandReform oftheFamily-BasedCorporateGovernance SysteminAsia 98 1 Anewconceptualframeworkandtypology: family-basedcorporategovernance 100 2 Financing,monitoringandperformanceoffamily businesses 105 3 FBSatdifferentstagesofdevelopment:legal systems,transactionscostsanddiversification 110 4 Developmentoffamilybusinesses,transactionscosts anddiversification 115 5 Amathematicalmodelofcorporategovernanceand financingofanentrepreneurialfirm:thelimitsofthe principal-agentmodel 117 6 Optimalcontracts 118 7 Conclusionsandsuggestionsforfutureresearch 122 Appendix6.1: Family-basedbusinessesinThailand 125 Appendix6.2: Enhancementofcontrolinthe family-based(FBS)typeofcorporate governance 128 Appendix6.3: Abolitionofregulationsprotectingthe chaebols 129 Appendix6.4: PerformanceofEastAsiancorporate systems:growth,financingandliabilities 130 Appendix6.5: Policyandinstitutionalquestions 134 Appendix6.6: Sometheoreticalissues:incomplete contractsandtransactionscosts 138 7 AsianBanks:CanTheyLearntoAssessRisksBetter? 145 (withC.-S.Lin) 1 Introduction 145 2 Somerceivedviews:acriticalreview 146 3 Methodology 149 4 Empiricalresults 157 5 Chaptersummary 163 8 TowardsaNewGlobalFinancialArchitecture 165 1 Introduction 165 2 Financialevolution:debtcontractsandequityin globalcapitalmarkets 169 3 Extendingthepanda’sthumb:anevolutionarytheory ofGFAandRFAs 174 Contents ix 4 Whatkindofthumb?TwobroadtypesofGFAs followingfromtheevolutionarytheory 178 5 TheroleofanRFA:acounterfactualexperiment withtheAsiancase 183 6 TowardsaworkablehybridGFA:RFAs,theIMFand nationalpolicymanagementduringtransition 185 7 Summaryandconclusions 190 Appendix8.1: Evolutionarygrowthdynamics–some usefulevolutionaryeconomicstheorems 191 9 GeneralConclusions:FromCrisistoaGlobalPolitical EconomyofFreedom 193 NotesandReferences 212 Bibliography 218 Index 246

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