The financial crisis, which was erupted in Asia through the collapse of the
Thai Bath in July 1997, led to sharp declines in the currencies, stock
markets and other assets prices of a member of Asian countries. This crisis
threatened those countries financial systems and disrupted their real
economics, with large contractions in activity that created a human crisis
alongside the financial one. Moreover, this financial precipitated deep
recessions in the “tiger economies”, resulting in a sharp drop of living
standards together with rising unemployment and social dislocation. Not in
the region, rather the crisis has put pressure on emerging markets outside
the region; contributed to virulent contagion and volatility in international
financial markets. International Monetary Fund (IMF) came to the rescue.
Some countries adopted IMF policies while others did not. Quite
interestingly though countries like Malaysia that did not take any loan from
IMF recovered at faster pace than IMF loan receiving countries. This posed
a blatant challenge towards the vitality and viability of IMF structural
programs not only in East Asia but also in other parts of the world. In light
of that challenge, this paper analyzes the root causes of the Asian crisis and
the role of IMF in tackling the crisis. It does a comparative analysis
between IMF loan recipient countries like Indonesia, Korea, Thailand, and
non-recipient country Malaysia in order to know whether IMF policies
helped or hindered economic recovery.
