Question 1

The Chiang Mai Initiative was a regional body

Accepted Answer

The Chiang Mai Initiative was proposed by Japan in 2000 as a supplement to the existing regional financial arrangements in Asia, and was designed as a kind of Asian Monetary Fund to provide a safety net in the event of future financial crises. It was named after the city where the proposal was first discussed. The initiative was supported by China and the ASEAN countries, while the US did not take part in its establishment.

Question 2

East Asian economies have been able to run persistent current account surpluses because their governments

Accepted Answer

C

Question 3

Weaknesses in the Asian financial systems in the late 1990s was caused by

Accepted Answer

Appreciating currencies and popping real estate bubbles led to weaknesses in the Asian financial systems in the late 1990s.

Question 4

The financial crisis and macroeconomic stabilization precipitated deep recessions throughout Asia in 1998.The country that was the worst hit was

Accepted Answer

Indonesia was the worst hit country during the Asian financial crisis in 1998, with its GDP declining by 13.1% and its currency, the rupiah, losing more than 80% of its value. Other countries such as Thailand, South Korea, and Malaysia were also heavily affected, but Indonesia suffered the most severe economic downturn.

Question 5

According to Oatley,historical evidence suggests that more volatile capital flows have been associated with

Accepted Answer

Historical evidence suggests that more volatile capital flows have been associated with lower economic growth rates over the long run. This is because volatile capital flows can lead to instability in financial markets and currencies, which can harm investment, erode confidence, and reduce economic growth prospects in the long run.

Question 6

According to Oatley,Bretton Woods II arguably played a key role in the development of the global financial crisis of 2008-2009 because

Accepted Answer

According to Oatley, Bretton Woods II played a key role in the development of the global financial crisis of 2008-2009 because the demand for US government debt instruments drove down interest rates. This led to a search for higher returns by investors, which resulted in the creation of complex financial instruments that eventually collapsed and caused the crisis.

Question 7

"Moral hazard" in the field of international political economy is when

Accepted Answer

Moral hazard in the field of international political economy is when financial institutions, such as banks or insurance companies, believe that the government will bail them out if they suffer large losses on the loans they have made. This belief can lead them to take on excessive risk or make risky loans they otherwise wouldn't because they feel protected by the government's safety net. This can increase the likelihood of financial crises and create instability in the financial system.

Question 8

In absolute terms,sub-Saharan African total external debt

Accepted Answer

The text states that sub-Saharan African total external debt has higher debt-service ratios than Latin American ratios in the 1980s. The other options are incorrect: A is false because it compares sub-Saharan African debt to Latin American debt in nominal terms; B is false because it compares sub-Saharan African debt to Asian debt in nominal terms; C is false because it compares sub-Saharan African debt to Latin American debt as a share of GDP, rather than in absolute terms; and E is false because the text does not mention that sub-Saharan African debt has been cancelled entirely by the World Bank and IMF since 2005.

Question 9

East Asian governments drew one overarching lesson from the crisis and crisis management -

Accepted Answer

East Asian governments learned to avoid economic vulnerabilities that could lead to IMF intervention, as they wanted to maintain economic sovereignty and avoid the stringent conditions imposed by the IMF.

Question 10

East Asian governments as a group accumulated more than half of global reserve holdings by then end of 2009.The country with the largest stock of foreign exchange reserves was

Accepted Answer

China had the largest stock of foreign exchange reserves by the end of 2009, with $2.4 trillion. Japan, Indonesia, and South Korea all had reserves of $1.4 trillion or lower, making them unlikely choices for the largest stock of reserves. As of 2021, China still holds the largest stock of foreign exchange reserves, with an estimated $3.2 trillion.

Question 11

During the Asian financial crisis in 1997-1998,the IMF granted South Korea,Indonesia,Thailand and Malaysia

Accepted Answer

The answer of During the Asian financial crisis in 1997-1998,the...

Question 12

Financial crises became all too common during the 1990s.Each crisis was distinctive but shared the similarities that they

Accepted Answer

Financial crises of the 1990s shared the characteristics of involving some form of fixed exchange rate and a heavy reliance on short-term foreign capital. This is because fixed exchange rates make a country vulnerable to fluctuations in the value of its currency, and short-term capital inflows can be quickly withdrawn, leading to a sudden shortage of foreign exchange reserves and other related problems. The crises in Mexico (1994), East Asia (1997-98), Russia (1998) and Brazil (1998-99) all had these characteristics.

Question 13

"Hot money" refers to

Accepted Answer

"Hot money" typically refers to private capital that can be easily withdrawn from a country at the first sign of trouble, such as political instability or economic downturn. This can have negative effects on the country's financial stability and currency exchange rate. Bond and derivative funds (choice A) are not necessarily considered "hot money" unless they are easily liquidated. Public capital that cannot be easily withdrawn (choice C) is not considered "hot money" as it is typically invested in long-term projects and infrastructure. Choices D and E are not accurate descriptions of "hot money."

Question 14

According to Oatley,private capital flows in the early 1990s were radically different because it was

Accepted Answer

According to the author, private capital flows in the early 1990s were radically different because it was much easier to move capital into and out of emerging markets and financial liberalization in advanced industrial countries had increased the importance of securities.

Question 15

Which of the following conditionality agreements was not required by the IMF as part of the assistance packages in 1997-98?

Accepted Answer

Regulation of agricultural enterprises was not a conditionality imposed by the IMF in 1997-98 assistance packages. The other options listed were required conditionality measures such as monetary policy tightening, elimination of monopolies, privatization of state-owned enterprises, and trade liberalization.

Question 16

Asia was the largest recipient of capital inflows,accounting for almost _____ of total flows to all developing countries in the first half of the 1990s.

Accepted Answer

Asia was the largest recipient of capital inflows, accounting for almost 50% of total flows to all developing countries in the first half of the 1990s. This significant share underscores Asia's attractiveness to investors and its pivotal role in the global economy during that period.

Question 17

Together the world's poorest countries,mostly in Africa,owe foreign creditors about

Accepted Answer

The answer of Together the world's poorest countries,mostly in Africa,owe...

Question 18

The system that resulted from the arrangements that came from the IMF intervention in the East Asian financial crisis in the late 1990s has come to be called "Bretton Woods II" because

Accepted Answer

The term "Bretton Woods II" refers to the informal arrangement where East Asian countries, particularly China, accumulate large reserves of US government securities to maintain their currency exchange rates at a competitive level, similar to the original Bretton Woods system where countries held US dollars as a reserve currency pegged to gold. This accumulation supports the US dollar and allows the US to run large trade deficits, particularly with these East Asian countries, fostering global economic stability as long as these countries continue to support the US dollar in this manner.

Question 19

East Asian governments peg to the dollar because

Accepted Answer

The answer of East Asian governments peg to the dollar...

Question 20

Most of the debt of the world's poorest countries is owed to

Accepted Answer

The debt of the world's poorest countries is mostly owed to official lenders like IMF & World Bank. These countries often rely on loans from these institutions to finance their development projects and support their economies. However, the debt burden can become unsustainable, leading to difficulties in meeting repayment obligations and hindering economic growth.

Quiz 15: Developing Countries and International Finance II: a Decade of Crises