Developing markets crisis

01/07/2013 12:00 AM


D. Haider Ali al-Dulaimi,
a lot of countries, especially developing countries are forced to borrow from abroad in the case of a lot of obstacles that stand in the domestic savings to configure the capital benefit from these countries for investment purposes.
economic theory stresses that countries that have lot of money is done exploiting its investment projects with Return the physical high, and on this basis can the rich countries take advantage of this money in profitable investment in developing and poor countries, and on this basis has increased each of the portfolio securities and direct investment into developing countries during the years that has these countries to borrow foreign any at the end of the last century and the beginnings of the current century.
with the process of borrowing Alajpna highlights some of the risks, has shown this experience that the rich countries lend to poor countries involves a cycle of lending opportunities, profits and expansion of excess and speculation, crises and decrease the flow of funds, which is followed by a new round of lending albeit from another group of investors who have optimism has no boundaries, and that's what that ending the crisis even explode again.
between 1997 and 1998, broke a financial crisis, and this crisis followed the rapid growth of investment in emerging markets, and this is the name for the markets, called on countries fast-growing low-income and middle, which is considered fertile areas for foreign investment. In the nineties of the last century, sent investors and venture capitalists in the rich their money out of their countries in pursuit of returns higher than at the same time welcomed the poor countries in need of such funds, so the flow of foreign funds such as Thailand, Malaysia and South Africa, other poor countries, During that period increased both loans and investments in money market and bond quickly.
Whenever continued growth in emerging markets in these poor countries, everything is going fine, but slower growth accompanied by a series of crises, banking, led to a movement of the external flows enormous money short-term, to escape from the markets of Thailand, Indonesia, Malaysia, South Korea, at the same time tried to banks that have invested heavily recover their loans, which in turn led to a sharp increase in the presentation of currencies of those countries that have been associated mostly systems exchange fixed and limited, and flooded Operations Selling reserves of these countries. The state after another found East Asian countries that their currencies began to collapse in a strong, has asked a lot of economists that interfere with the International Monetary Fund to provide funds short-term, but this requires the Fund put monetary and fiscal policies Tkulaisah, what resulted in periods of recession, large commercial in all East Asian countries.
At the beginning of the year 2000 the majority of those countries able to work their way out of the crisis after passing through a period of economic adjustment for each of the slow rate of production growth, and the collapse of real wages and debt rescheduling and trade surpluses. And once again was the resumption of the process of economic growth, and thus the world was able to overcome another financial crisis. But the disease usually lies at the heart of the international financial system, which seize the opportunity to pounce and wounded following the herd of large speculative.

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