Macroeconomic Adjustments of the East Asian Economies after the Crisis: A Comparative Study

This paper examines the role of macroeconomic environment in the adjustment processes of the East Asian Crisis. It first reviews the macroeconomic development after the crisis in the five East Asian countries (Indonesia, Korea, Malaysia, the Philippines, and Thailand) and contrasts the degree to which each country has been affected by macroeconomic constraints. Based on that, it attempts to make assessments on what caused such a severe economic contraction and recent recovery in the region. Several policy implications follow out of our analysis. First, accommodative macroeconomic policies will be needed to continue for a while, perhaps until a clear sign of inflationary pressure develops, to prevent weakening of the corporate financial structure. Second, resumption of private capital flow will be an essential factor for the fast recovery of these economies. Third, more serious and comprehensive efforts are necessary to encourage the development of capital markets. Fourth, the IMF policy packages to be imposed on the future crisis-hit countries will be needed to be better tuned to individual market circumstances such as corporate leverage ratio, openness of the economy and etc.