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Financial Crises and East Asia's Financial Cooperation
Region: Asia
Theme: Economics
Published May 25, 2011
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East Asia is an area where real economic activities are closely linked. The brisk trade in goods and services among East Asian countries shows a well-integrated East Asian economy. Most trade by East Asian countries is cleared in U.S. dollars, however, which implies that, when foreign exchange shocks occur, countries in the region are highly vulnerable to financial crisis caused by foreign exchange market risks. Further, East Asia may also suffer from financial market collapse and economic recession. economic linkages within the region might, however, lead to the risk of crisis contagion. One example is the Asian financial crisis of 1997: the initial crisis in Thailand triggered contagion in other neighboring countries in East Asia. Financial instability originating from crisis contagion has a significant impact when operating in a regional economy.

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