Infrastructure and Productivity in Asia
The Asian financial crisis in the late 1990s was triggered by a sudden sharp reversal in the direction of global portfolio flows. The massive outflows within a short period of time led to a severe liquidity squeeze, which resulted in severe balance sheet stress. The combination of this with a steep correction in Asian exchange rates saw aggregate demand fall and operating costs rise overnight, undermining the viability of many Asian corporations. Productivity suffered as a result of the implicit sharp jump in the cost of capital, adversely affecting investment and consequentially confidence in these economies. Asia met the challenge head-on by directly rectifying weaknesses through macroeconomic policy and undertaking broad-based reform of the financial sector and quickly engineering a restoration of financial stability and a recovery of its economic growth rates.
KeywordsExpense Pyramid Malaysia Stake Harness
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