Twin Crises : A Comparative Analysis of the Global Financial Crisis of 2007-09 and the Asian Financial Crisis of 1997-99

This paper presents a comparative analysis of the key causes and effects of The Asian Financial Crisis (AFC) of 1997-99 and the Global Financial Crisis (GFC) of 2007-09. Drawing on existing financial crisis scholarship, the author finds that weak institutions, speculative attacks and political corruption were accelerants of the AFC and GFC, but not root causes. The author finds evidence that, as with the Global Financial Crisis, the most important factors were (a) the rapid accumulation of credit and an asset price boom in the lead-up to a banking crisis, (b) a consequent sharp deterioration of asset values through a leverage downswing, (c) the impact of a leverage downswing on securities markets and financial institutions at systemically important junctures within under- and unregulated frontiers, and (d) credit and liquidity crunches that froze capital allocation. These patterns offer lessons about common themes across financial crises, and recommend several areas that may be the subject of continued research