Question

What are the major differences between 1997 and the present in terms of the country’s financial systems and foreign reserve positions?

Answer 1

Many Asian countries built up large reserves after the 1997 crisis to avoid not having enough reserves. They also shifted to floating or flexible currency regimes so they will not need so much reserves and cleaned up the banking and financial systems a lot more , so they are not so vulnerable to bad debts etc. But in practic , no country can let the exchange rate collapse a lot-so the central banks are forced to intervene even when the currency is floating - and hence use up reserves, banking and financial systems have got used to borrowing cheap from overseas where rates are very low. Most Asian countries had large reserves when GFC hit in 2008 , but the reserve positions have deteriorated since then.