Question

List some of the major financial events of the 1990s to illustrate the impact of exchange rate fluctuations on the economy

Answer 1

Following were two key financial events in 1990s:

• Asian Financial Crisis 1997
• Russian Financial Crisis 1996.

Impacts of Asian financial crisis were severe and profound. BOP of few Asian countries such as Philippine, Indonesia etc deteriorated due to financial mismanagement. These countries could not handle massive inflow of foreign investments. Foreign capital flied away on inkling of risk. It led to crashes of stock markets world over. Capital moved back to US for safe returns. Dollar value increased relative to many other currencies. Most of countries experienced fall in values of their currencies. It affected growth rate adversely. Investments were discouraged, US export became costly due to appreciation of currency. Many countries deliberately lowered values of currencies, it further affected US economy negatively,