|
Governments’ failures led to emerging market crises: Nobel winner
Economic crises in emerging markets have been caused by governments’ neglect to control the inflow of foreign capital, Nobel prize-winning economist Paul Krugman said Friday.
He said the 1997 Asian financial crisis and a more recent one in Eastern Europe had similar roots.
“In both cases large inflows of capital took place, large-scale borrowing in foreign currency, and the governments basically stood aside while that happened,” he told reporters in Hanoi while on an Asian tour.
“They were complacent.”
And regarding Vietnam, he said: “I think that the point is to be cautious about opening yourself up to foreign capital, to be very cautious.”
He said the warning for Vietnam, which has been actively courting foreign investment, is that, “If your country becomes fashionable with international investors, that’s a time to get really worried.”
Economies in Central and Eastern Europe have been ravaged since late 2007, largely because many of the countries had relied heavily on foreign capital or high commodity prices.
During the 1997-1998 Asian financial crisis Indonesia, Thailand and South Korea had to borrow heavily from the International Monetary Fund to boost their finances as investors sold their currencies.
“Most of the developing countries that have gotten into severe trouble have gotten there through neglect rather than through active policy,” Krugman said after meeting Vietnamese officials.
thanhnien, AFP
|
