Question 1

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

Accepted Answer

A)   official lenders like IMF & World Bank.
B)   resource-exporting MNCs.
C)   East Asian governments.
D)   East Asian export companies.
E)   oil exporting governments. A

Question 2

Explain how the problem of "moral hazard" made it especially difficult for Asian banks to intermediate safely between international and domestic financial markets.

Accepted Answer

The problem of "moral hazard" refers to the risk that individuals or institutions may take on greater risks because they know they will not bear the full consequences of their actions. In the context of Asian banks intermediating between international and domestic financial markets, moral hazard made it especially difficult for them to do so safely.

During the Asian financial crisis of the late 1990s, many Asian banks were exposed to moral hazard as they engaged in risky lending and investment practices. This was partly due to the implicit guarantee of government bailouts, which led to a lack of market discipline and encouraged excessive risk-taking. As a result, when the crisis hit, many of these banks faced significant losses and were unable to effectively intermediate between international and domestic financial markets.

Furthermore, the lack of transparency and regulatory oversight in many Asian financial systems exacerbated the problem of moral hazard. Without proper checks and balances in place, banks were able to take on excessive risks without fear of repercussions, leading to instability and inefficiency in their intermediation activities.

Overall, the problem of moral hazard made it difficult for Asian banks to safely intermediate between international and domestic financial markets by incentivizing risky behavior and undermining the stability of the financial system. Addressing this issue requires improved regulatory frameworks, greater transparency, and a reduction in the implicit guarantees of government bailouts to encourage more responsible and sustainable intermediation practices.

Question 3

East Asian governments peg to the dollar because

Accepted Answer

A)   the United States is the largest economy in the world.
B)   the United States is their most important trade partner.
C)   the dollar is the international reserve currency.
D)   the dollar is undervalued.
E)   the dollar is overvalued. B

Question 4

Eligibility for the HIPC initiative was launched in 1996 with the goal to reduce foreign debt to sustainable levels.The IMF and World Bank estimated that the typical country that completed the program would see

Accepted Answer

A)   its debt reduced by one quarter and its debt-service ratio cut by one third.
B)   its debt reduced by one half and its debt-service ratio cut in half.
C)   its debt reduced by one third and its debt-service ratio cut by one third.
D)   its debt reduced by two thirds and its debt-service ratio cut in half.
E)   its debt reduced by three quarters and its debt-service ratio cut by two thirds.

Question 5

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

A)   Japan with $1.4 trillion.
B)   Indonesia with $1.4 trillion.
C)   S. Korea with $1.4 trillion.
D)   China with $2.4 trillion.
E)   China with $4.4 trillion.

Question 6

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

A)   US trade surpluses currently drive growth in East Asia, just as they drove early postwar growth in Europe.
B)   the system is stable as long as East Asian countries are willing to accumulate US government securities like Europeans did with U.S. gold.
C)   US trade deficit drives growth in East Asia, and floating exchange rate stabilize the value of the dollar.
D)   the system is stable as long as East Asian countries are willing to accumulate US gold like Europeans did.
E)   the system is still based on fixed exchange rates and IMF interventions.

Question 7

The large debt burden reduced the incentive that governments have to undertake economic reform because

Accepted Answer

A)   many of the economic gains from reform accrue to foreign lenders.
B)   these societies suffer from geographical isolation.
C)   these societies have adverse ecologies.
D)   these societies have high fertility rates.
E)   these societies have a recent history of civil or international war.

Question 8

Explain and discuss the dramatic financial crisis in Argentina in 2001 and 2002.How could have the government avoided this crisis?

Accepted Answer

The answer of Explain and discuss the dramatic financial crisis...

Question 9

The emergence of large and liquid private capital flows to developing countries contributed to a rash of financial crises during the 1990s.

Accepted Answer

A) True 
 B)False

Question 10

The suggestion that developing countries should reintroduce controls to limit the volume of private capital flows ultimately carried the day.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A)   $50 billion.
B)   $200 billion.
C)   $500 billion.
D)   $750 billion.
E)   $1.0 trillion.

Question 12

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

Accepted Answer

A)   much more difficult to move capital into and out of emerging markets and financial liberalization in advanced industrial countries had increased the importance of securities.
B)   much easier to move capital into and out of emerging markets and financial liberalization in advanced industrial countries had increased the importance of securities.
C)   much more difficult to move capital into and out of emerging markets and financial liberalization in advanced industrial countries had decreased the importance of securities.
D)   much easier to move capital into and out of emerging markets and financial liberalization in advanced industrial countries had decreased the importance of securities.
E)   the importance of commercial bank lending increased and financial liberalization in advanced industrial countries had increased the importance of securities.

Question 13

Explain and discuss suggestions for change of the debt management regime established in the 1980s in the wake of the financial crises of the 1990s.Which of these ideas was ultimately adopted?

Accepted Answer

The answer of Explain and discuss suggestions for change of...

Question 14

The Asian financial crisis of 1997 originated in political and economic dynamics in Thailand,Indonesia,South Korea and Singapore.

Accepted Answer

A) True 
 B)False

Question 15

Because African debt was owed to official rather than private creditors,the African debt crisis emerged slowly unlike the crises in Latin America and Asia.

Accepted Answer

A) True 
 B)False

Question 16

Explain how policies toward private capital flows to developing countries were radically different in the 1990s.How did these changes combine to alter the composition,as well as the scale,of private capital flows to the developing world?

Accepted Answer

The answer of Explain how policies toward private capital flows...

Question 17

In absolute terms,sub-Saharan African total external debt

Accepted Answer

A)   is nominally about the same as the amount of debt incurred by Latin American during the 1980s.
B)   is nominally about the same as the amount of debt incurred by Asia during the 1990s.
C)   measured as a share of GDP, is only a fraction of the amount of debt incurred by Latin American during the 1980s.
D)   has much higher debt-service ratios than Latin American ratios in the 1980s.
E)   has almost entirely been cancelled by the World Bank and IMF since 2005.

Question 18

Explain how the roots of the 2008-2009 global financial crises lie in East Asia's governments' responses to the 1997 crisis.

Accepted Answer

The answer of Explain how the roots of the 2008-2009...

Question 19

Explain the conditions under which the HIPC initiative developed and changed in response to the debt reduction challenges of the world's poorest countries.Does debt cancellation encourage moral hazard dilemmas by both lenders and governments?

Accepted Answer

The answer of Explain the conditions under which the HIPC...

Question 20

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

Accepted Answer

A)   Tightening of monetary policy to stem depreciation
B)   Regulation of agricultural enterprises
C)   Elimination of domestic monopolies
D)   Privatization of state-owned enterprises
E)   Trade liberalization

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

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

Explain how the problem of "moral hazard" made it especially difficult for Asian banks to intermediate safely between international and domestic financial markets.

East Asian governments peg to the dollar because

Eligibility for the HIPC initiative was launched in 1996 with the goal to reduce foreign debt to sustainable levels.The IMF and World Bank estimated that the typical country that completed the program would see

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

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

The large debt burden reduced the incentive that governments have to undertake economic reform because

Explain and discuss the dramatic financial crisis in Argentina in 2001 and 2002.How could have the government avoided this crisis?

The emergence of large and liquid private capital flows to developing countries contributed to a rash of financial crises during the 1990s.

The suggestion that developing countries should reintroduce controls to limit the volume of private capital flows ultimately carried the day.

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

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

Explain and discuss suggestions for change of the debt management regime established in the 1980s in the wake of the financial crises of the 1990s.Which of these ideas was ultimately adopted?

The Asian financial crisis of 1997 originated in political and economic dynamics in Thailand,Indonesia,South Korea and Singapore.

Because African debt was owed to official rather than private creditors,the African debt crisis emerged slowly unlike the crises in Latin America and Asia.

Explain how policies toward private capital flows to developing countries were radically different in the 1990s.How did these changes combine to alter the composition,as well as the scale,of private capital flows to the developing world?

In absolute terms,sub-Saharan African total external debt

Explain how the roots of the 2008-2009 global financial crises lie in East Asia's governments' responses to the 1997 crisis.

Explain the conditions under which the HIPC initiative developed and changed in response to the debt reduction challenges of the world's poorest countries.Does debt cancellation encourage moral hazard dilemmas by both lenders and governments?

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