East Asian Financial Crisis, International Capital Flows Between Research,

Many emerging market countries have been implementing financial liberalization since 1 980s. The recent East Asian financial crisis gives some important lessons to these countries, especially to China which is just at its critical stage of marketlizing reform. Understanding the crisis better is significant for the policy-making of these countries, which determines how great an effect the policies pose for the market, how great the crisis affects the economy and how long the crisis lasts. This thesis sets out to study, from a macro-economic perspective, the causes of the crisis, noting that the reversal of international capital inflows is the underlying cause of the crisis (Chapter 1). Then the thesis identifies, on the basis of a micro-economic analysis, that the moral hazard, herd effect and contagion effect of the financial market are the fundamental causes of the international capital flight from the East Asian countries (Chapter 2). After outlining the underlying causes of the crisis in the above chapters, the thesis examines the best solutions on how to avoid future crises like this and what to do if such crises occur, pointing out that a sequence of prerequisites must be met for successful financial liberalization and the reform process must be carefully designed to achieve the ultimate objective of the liberalization, that is, to raise efficiency and growth (Chapter 3). In the last chapter, the thesis specializes in discussing the role of the International Monetary Fund (IMF) in rescuing the crisis and then puts forward several guiding principles for the Fund performing as the lender-of-last-resort (Chapter 4).