
442 A Systems Perspective on Financial Systems
As for the evaluation of moral hazard theory, the theory can be well employed to
explain the characteristics of the East Asian financial crisis. In particular,
Firstly, the good financial situations of the East Asian countries, which suffered from
the crisis, were not true reflections of the real economic states. Behind the displayed
balance sheets were huge amounts of hidden debts, which were the large amounts
of implicit guarantees provided to the financial institutions.
Secondly, before the crisis broke out, these nations experienced slumping drop in assets
prices. For example, after Thailand experienced ...