The panic wrought by the 1997 Asian financial crisis spurred different mitigative measures. Some states assented to IMF bailout and restructuring, while others enforced capital control. Since then, despite intense academic and regulatory scrutiny of the nuances of the recession, empiric focus on recovery trajectory of affected countries centred chiefly around traditional GDP metrics; an approach that disregards economic performance in a manner congruent with Sustainable Development Goals (SDG). In this paper, we adopt a broader SDG-compatible approach by tracking two affected countries’ (Korea and Malaysia) recovery via operationalizing an alternative growth indicator GPI (Genuine Progress Indicator). First, we construct a 35-year long GPI index from 1980 to 2014 and employ the Solow Growth Model to measure the impact of the two remedial measures on GDP and GPI of both countries. Employing an ARDL approach, we find external debt to impact significantly the GDP and GPI of Korea. Meanwhile for Malaysia, the controversial capital control failed to register significant impact. Moreover, unemployment rates, trade openness, fixed capital formation and the history of previous crises are found to be influential determinants of GDP and GPI, with credit and exchange rate variables showing ambiguous results.

Introduction

In the mid-1990s, a collapse of Thai Baht precipitated a cascade of currency collapses, culminating in a full-blown economic crisis in the South-East and East Asian regions. Ever since, this crisis has remained significant for academics and policymakers owing to its sudden trigger, rapid percolation, and varied consequences. For economists concentrating on crises, the 1997 crisis also serves as an epicentre for tracking crisis management schemes and recovery trajectories. In this regard, two economiesdMalaysia and Koreadstand out as candidates for deeper investigation due to disparate recovery paths undertaken. The former imposed hard capital controls, while the latter acceded to IMF bail-out and restructuring. Since then, both economies performed impressively. Measurements of recovery over these periods have largely centred around economic growth metricsdmost specifically medium-term rates of GDP growth within a decade (Corden, 2007; Zumkehr and Andriesse, 2008). This traditional usage of GDP as the chief marker of economic growth and success has come under criticisms lately. Scholars concerned with Sustainable Development Goals (SDG) criticize the GDP approach arguing that a policy of targeting GDP-centred growth leads to degradation of the environment, broadens wealth inequality, and results in distorted social dynamics (Philipsen, 2015; Pintner et al., 2012; Van den Bergh, 2009).