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Collaboration for Future: Insights from Asian Central Banks Crisis

Explore the Asian financial crisis and lessons learned through a study by Alan Shapiro, Frederic Mishkin, and the IMF. Understand factors like foreign currency debt, overvalued currencies, and the role of central banks for economic stability.

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Collaboration for Future: Insights from Asian Central Banks Crisis

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  1. Working Together for a Better Future Asian Central Banks

  2. The Asian Financial Crisis

  3. The Setting of The Stage Before the Crisis (Alan Shapiro, 2005) • Export Oriented • Foreign Currency Denominated Debt • Government Directed Capital Allocation • Overvalued Currencies

  4. The Experience and Aftermath (Alan Shapiro, 2005) • Chinese yuan against USD (25 %) • Waves of currency selling ( 40-80%) • Huge debt in dollars • Capital flight (stock market crashes) • Banking systems disrupted • Economies contracted

  5. Lessons Learnt (Frederic Mishkin, 1999) • Central Bank lender of last resort • International capital flows • Foreign Currency Denominated Debt • International Foreign Reserves

  6. Source: IMF, World Economic Outlook, October 2008

  7. From the Asian Crisis to the Sub-prime

  8. The Interval (IMF, 2008) • Relatively Low Exchange Rates • Current Account Surpluses (Oil & Exports) • Large Accumulation of Foreign Reserves

  9. Source: Bank of Canada Source: Sovereign Wealth Fund Institute, IMF, and other Governmental Sources

  10. Roads to the Sub-prime Mortgage Crisis (IMF 2008) • Foreign Reserves • Sufficient Cushion against External Financial and Economic Shocks Transferring Assets to Sovereign Wealth Funds ($2-3 trillion)

  11. Largest Sovereign Wealth Funds by Assets Source: Sovereign Wealth Fund Institute

  12. Financial Markets • Equities • Sovereign Debt • Corporate Debt • Real Estate • Infrastructure

  13. Evolving Central Banks (Frederic Mishkin, 2000) Monetary Policy • Open Market Operations, Overnight Policy Rates, Reserve Requirements, Discount Rates Financial Markets • Temasek Holdings UBS • Abu Dhabi Investment Authority Citigroup

  14. Contributing Factors to the Crisis (Newsweek 2008) Besides Mortgage Bankers, Wall Street, Credit Rating Agencies The Federal Reserve China, Japan and other Sovereign Wealth Funds

  15. Source: Bloomberg, The Star

  16. Challenges in the Next Society

  17. The Next Society

  18. The Next Society

  19. Opportunities – The Road Ahead

  20. Opportunities – The Road Ahead

  21. Opportunities – The Road Ahead

  22. Facilitating Development • Supporting commercial banks • Helping companies (involved in these industries) to raise capital Bonds Equity

  23. Question and Answer Session

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