Pablo Bustelo

Novelties of financial crises in the 1990s and the search for new indicators

Abstract This paper argues that, first, despite some similarities, financial crises in the 1990s have featured substantial differences between them: the ERM crisis of 1992–1993 was mainly due to stringent monetary policies; the Mexican crisis of 1994–1995 was associated to private overconsumption; and the East Asian crisis of 1997–1999 were basically the result of private overinvestment. Therefore, as crises do not seem to present strong regularities over time, the task of trying to predict them on the basis of past developments is surely doomed to fail. As crises might be simply unpredictable, specialists should refrain from creating and developing predictors and focus instead on simpler early-warning indicators. Second, the paper reviews the main body of literature on leading indicators of crises and it suggests that the bulk of these conventional indicators do not seem to be appropriate to the East Asian episodes. In order to create a new set of early-warning indicators, economists should focus on non-conventional deficiencies, such as those related to financial fragility associated with financial deregulation and with capital inflows, to a declining efficiency of investment, and to a high short-term external debt (especially as a proportion of foreign exchange reserves).

China and the Geopolitics of Oil in the Asian Pacific Region

China’s growing demand for oil is significantly changing the international geopolitics of energy, especially in the Asian Pacific region. The recent growth in oil consumption, combined with forecasts of increased oil imports (especially from the Middle East), have led to deep concern among Chinese leaders regarding their country’s energy security. They are responding in a number of different ways. In particular, they are determined to increase the security and reliability of oil imports by searching for new sources of supply, and to control purchases and transport lanes, while boosting national production at any cost. This is already causing tension and could lead to further disputes with the US and other big oil consumers, such as Japan and India, as well as with other Asian Pacific countries. However, enhanced cooperation among the big East Asian economies (China, Japan and South Korea) is also a possibility. This document first of all presents an overview of China’s energy sector, emphasising the strong growth in its energy demand to date and its potential for future growth. Secondly, we look at the oil sector, highlighting China’s growing dependence on imports. The third part deals with the Chinese perception of energy security in the oil sector. Finally, the fourth part focuses on the geopolitical implications for the Asian Pacific region of China’s search for oil.

Capital Flows and Financial Crises: A Comparative Analysis of East Asia (1997-98) and Argentina (2001-02)

This paper suggests, first, that a simple theoretical framework is useful in explaining financial crises in emerging economies. Second, it reviews the East Asian financial crises of 1997-98. Third, the paper examines the origins of Argentinas crisis of 2001-02. Fourth, it presents a comparative analysis of both crises, highlighting their similarities and differences. Finally, the conclusions point out the drawbacks of both hard and soft pegs respective to a single foreign currency as well as the need for emerging economies to use capital controls in order to avoid the recurrence of financial crises.

Energy Security with A High External Dependence: The Strategies of Japan and South Korea

Besides China, Northeast Asia includes other important energy consumers: Japan and South Korea. These OECD-member economies are highly dependent on imports (which account for more than 80% of domestic consumption in both cases), especially of oil and natural gas, and their energy security has been subjected to considerable threats in recent years. This paper briefly reviews the energy situation and prospects of both countries. It also presents an analysis of Tokyo’s and Seoul’s strategic responses to the (perceived o real) worsening of their energy security, in which the strenghts and weaknesses of each approach are highlighted. Finally, the paper lists some of the lessons that other highly energy import-dependent economies might extract from the experience of Japan and South Korea.