For Asia, the impacts have been uneven across countries, depending on the size of the initial capital inflows and the maturity composition of external debt. Nonetheless, because of the higher levels of reserves, the absence of significant currency mismatches, and greater flexibility in the exchange rate regimes, emerging markets in Asia have been able to adjust better to the shock without undermining economic and financial stability. However, it may be noted that, so far, the impact from the trade channel has been the most severe. This is because of the large share of exports and manufacturing in the region’s GDP. For example, exports from the five ASEAN economies fell by about 12 percent in the fourth quarter of last year, and by 28 percent in the first quarter of this year, while GDP growth over the same two quarters fell by 0.6 percent. This decline is large and shows that Asian emerging markets remain closely tied to the global business cycle. Therefore, without improvements in the world economy, a sustained recovery in Asia will be difficult in the nearterm. Reflecting this, the focus of the policy response, at least in Thailand, has been to help the economy adjust to the impact of the crisis through a supportive stance of monetary and fiscal policies while maintaining the overall policy discipline. As for banks, the supervisory approach has been to ensure that the banking system remains healthy, and continues to operate fully to support the economy with good risk management and adequate capital.
Gazi Erçel: Risk management - within reserve management policies  Opening remarks by Mr Gazi Erçel, Governor of the Central Bank of Turkey, in the Conference titled “Current issues in reserves management for central banks in Europe, Middle East and North Africa” which has been organized by the World Bank Treasury in Istanbul on 4-5 May 2000. *  *  *  I am delighted to be with you today to offer some general remarks about reserve management, and our approach to risk management, at the Central Bank of Turkey. Before starting my speech, I would like to thank the World Bank for organizing this conference which, I believe, will be most beneficial to all of us. I am sure most of the important subjects related to new developments in reserve management will be covered in detail at this meeting. However, let me briefly comment on recent developments in managing risk within reserve management and share our experience at the Central Bank of Turkey with you. A string of disaster stories dominated the financial news coverage during the last two decades. A variety of factors could be cited as possible causes of these events. They include shortcomings in economic policy, inadequate supervision and, in most cases, poor risk management by the market players themselves. Beyond that, the basic issue is the financial system’s vulnerability to unforeseen events. We all learned much from these bad experiences but we are living in a changing world.