The World Dollar Standard and the East Asian Exchange Rate Dilemma

Author

Ronald McKinnon

Date

2001-09-04

Views

3730

R.McKinnon_the_World_Dollar_Standard_and_the_East_Asian_Exchange_Rate_Dilemma

The World Dollar Standard and the East Asian Exchange Rate Dilemma
- Speaker: Ronald McKinnon, Professor, Stanford University

- Date : September 4, 2001

"Before the 1997-98 crisis, banks in some East Asian debtor economies would accept low-interest dollar or even lower-interest yen deposits. Then they would lend at the much higher yields available on domestic currency loans. This risky currency mismatch was not confined to financial institutions in the debtor economies themselves. With a low-cost deposit base in yen, Japanese banks acquired higher yield assets in dollars, baht, won, rupiah, etc. Last but not least, the highly speculative so-called hedge funds would borrow in Tokyo and lend in Seoul, Bangkok, Jakarta, etc...”