forced to rescue the Guarantee Fund by providing a bail-out package of HK$4 billion dollars. New Zealand The crash of the New Zealand stock market was notably long and deep, continuing its decline for an extended period after other global markets had recovered. Unlike other nations, moreover, for New Zealand the effects of the October 1987 crash spilled over into its real economy, contributing to a prolonged recession. The effects of the worldwide economic boom of the mid-1980s had been amplified in New Zealand by the relaxation of foreign exchange controls and a wave of banking deregulation. Deregulation in particular suddenly gave financial institutions considerably more freedom to lend, though they had little experience in doing so. The finance industry was in a state of increasing optimism that approached euphoria. This created an atmosphere conducive to greater financial risk taking including increased speculation in the stock market and real estate. Foreign investors participated, attracted by New Zealand's relatively high interest rates. From late 1984 until Black Monday, commercial property prices and commercial construction rose sharply, while share prices in the stock market tripled. New Zealand's stock market fell nearly 15% on the first day of the crash. In the first three-and-a-half months following the crash, the value of New Zealand's market shares was cut in half. By the time it reached its trough in February 1988, the market had lost 60% of its value. The financial crisis triggered a wave of deleveraging with significant macro-economic consequences. Investment companies and property developers began a fire sale of their properties, partially to help offset their share price losses, and partially because the crash had exposed overbuilding. Moreover, these firms had been using property as collateral for their increased borrowing. When property values collapsed, the health of balance sheets of lending institutions was damaged. The Reserve Bank of New Zealand declined to loosen monetary policy in response to the crisis – which would have helped firms settle their obligations and remain in operation. As the harmful effects spread over the next few years, major corporations and financial institutions went out of business, and the banking systems of New Zealand and Australia were impaired. Access to credit was reduced. In fact, because of legislation requiring the Reserve Bank of New Zealand to achieve an inflation rate no higher than 2 percent by 1993, interest rates were volatile, with multiple increases. The combination of these