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

266 Pages·2004·2.66 MB·English

by  Haider A. Khan (auth.)

GlobalMarketsand FinancialCrisesinAsia
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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
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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’)
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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