Abstract :
There is an allience amongs representatives of third generation theories on that the traditional (canonical) crisis theories haven’t been able to explain the Asian crisis. The first generation crisis theories are locked on the weakness-soundness of the macreconomic fundamentals as explaining whether a financial crisis will happen or not. If the macroeconomic fundamentals are sound, the financial crisis will never occur. If the macroeconomic fundamentals, on the other hand, are weak, the financial crisis will occur exactly. The crisis happens as mecanical, and the central bank continues to maintain the fixed currency rate as blindly until it exhausts the final dollar of its international reserves. As if the central bank is locked on maintaining the fixed rate. The expectations haven’t any role on whether or not the financial crisis will happen. In a country, it can be known exactly when or whether a crisis occur or not. Also, the second generation crisis theories assign an essential importance to the macroeconomic fundamentals in the matter of whether a crisis will happen or not. But the second generation crisis theories, in opposite to the first generation crisis theories, claim that the soundness-weakness of the macroeconomic fundamentals stay in backround (as secondary) and that the existence of pessimist or optimist expectations determines if or not a financial crisis will happen. However, the second generation crisis theories imagine three probable situations about the soundness-weakness of the macroeconomic fundamentals: two opposite situations, and intermediate (third) situation between these opposite situations (white, black, and gray). In the case of that the macroeconomic fundamentals are so sound (white) or too weak (black), the expectations haven’t any role in respect to a crisis happen or not happen. In the country and in a specific time, it can be known exactly whether a crisis occur or not. In the third situation (gray area), on the other hand, the character of the expectations (being of them as pessimist or optimist) determine if or not a financial crisis occurs. In the case of the fact that there are the pessimist expectations, the crisis will happen exactly; that there are the optimist expectations, the crisis will never happen. Therefore, it cannot be anticipated exactly when or whether a crisis happen or not. Furthermore, in according to the second generation crisis theories, the governments and the central banks don’t lock blindly on maintaining the fixed currency rate. The governments and the central banks compare the benefits and the cost (increase in the interest rate, contraction in the economy and decrease in economic growth rate, increase unemployement rate) of the fixed rate in respect to the economic welfare and political general elections. They face with a trade-off between maintaininig the fixed exchange rate, and as a concequence, increase in the interest and unemployement rates. Despite the fact that the central bank has sufficient international reserves, if the central bank and the government think that the economic-political cost of maintaining the rate exceeds its benefits, they may decide to abandon defending the fixed exchange rate as a strategical preference. The fixed exchange rate system, therefore, collapses. The case in reality in the Asian crisis, however, was different from the theorical framework on which the first and second generation crisis theories depend because the macroeconomic fundamentals so sound that it is impossible a crisis to happen.. In our study it was foccused on “the international -self-fulfilling- financial panic” approach’s perspective about the Asian crisis. The international financial panic approach was constructed by Radelet and Sachs (1998a,b). Therefore, these two pappers were accepted as the origine about this approach. In according to the “international -self-fulfilling- financial panic” approach, the Asian financial crisis was an occurrence as a self-fulfilling financial panic and in the international charactere. Firstly, in the pre-crisis period the macroeconomic fundementals in the East Asian countries had been so sound that it had required no-happenning of a crisis. In this frame in the 5 countries in the East Asia (A5 countries; Endonesia, Philippines, Korea, Malaysia, and Thailand), it had been observed that before the crisis occurred; the average real economic growth rate about long term had been very high (over 5 %), inflation and unemployement rates had been very low (with one digit), general budget had exposed generally surplus, or rarely very little deficit (relative to GDP), the international reserves held by the central bank had been very high, the neth and private international capital inflows (relative to GDP) had been very high. This case hadn’t changed in the eve years of the crisis occurrence, also. Moreover, any disinflation program hadn’t been applied. Hence, the inflation rate with very low hadn’t been as a result such as a disinflation program. In the other expressions, the very low inflation rate had been natural, not artificial. In addition, the difference between interest rates in developped and in EM countries (including Asia’s crisis countries) hadn’t been grown through the pre-crisis period. However, in the pre-crisis period it had been observed that the current account deficit rate (relative to GDP) had increased continually, the export growth rate had slown down, real exchange rate became high, and national currency had continued being overvalued (relative to foreign currency) permenantly. Nonethless, according to the crisis literature, these problems aren’t sufficient and big in respect to explain whether the crisis happens or not. Secondly, the crisis case had been forecast by no-one not only long time ago but also in the eve of the occurrence. Exception Park (1996), neither one of the writers, researchers, analists and nor one of IMF, WB, international investment institutions, international financial institutions (including international credit rating agencies, such as S P) or the actors of market didn’t expect, also in the eve of the crisis, that a financial crisis would had occurred. The existence of the pessimist expectations had played as a key role in respect to the crisis explode or not explode. Thirthly, the financial sector’s problems and weaknessess had played an essential role in the occurrence of the crisis. Fourthly the international markets overreacted and punished the crisis countries more severely than which they had deserved. Finally, the cumulative real economic cost of the crisis for the country whose macroeconomic fundamentals had been the soundest of A5, opposite that expected, became the biggest. The “international self-fulfilling financial panic” approach has taken the basis, can be stated as “international short-term debts (obligations) on foreign currency to the central bank’s international reserves ratio”, as the centre; and had tried to explain the Asian crisis in the core of this basis. In respect an international financial panic case to happen or not happen, the ratio of “the intenational short-term debts (obligations) on foreign currency to the international reseves hold by the central bank” has to exceed 1.0. In respect to happening or no happening of an international financial panic, however, it is necessary but not sufficient that this ratio exceeds 1.0. It is only possible but not inevitable to happen the international financial panic when this ratio exceeds 1.0. In this situation both whether or not there were the pessimist expectations and whether or not a financial shock occurred determine if or not an international financial panic will happen. It can’t be anticipated exactly when and in which country an international financial panic will appear.
