International Financial Crises and the IMF

Demand failures are a major economic problem, and one that cannot necessarily be addressed by cutting interest rates as once believed. Small economies, such as those known as the Asian "tigers" are not invulnerable to international speculation. They may, in fact, resist cutting their interest rates -- raising them instead in an effort to keep their currencies from collapse. Failed economies financed poor investments with huge debt, and when the markets turned on their currencies -- causing them to plummet -- the foreign debt value grew astronomically causing an enormous number of companies to fail. The International Money Fund quickly identified the source of the crises as deeply structural and requiring fundamental financial reforms. Some pundits argue that the IMF should have focused more on the panic and less on reforms. Indeed, the variable performance of Korea (which rolled over debt) and Malaysia (which...
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