10.1 Painful experiences suffered by Southeast Asian countries in the 1997-98 financial crises clearly indicate that policy consistency or coordination is extremely essential for any country to survive in the current arena of mobile capital. Incidents of policy inconsistency were plentiful and they were accountable for the past crises. For example, even though funds [...]
9. Another controversial function of the BOT was to rescue ailing private financial institutions. Despite rapid advancement in banking and financial liberalization, the BOT maintained its long-held responsibilities in not just monetary policy but also safeguarding private financial institutions. The latter involves regulations, supervision, and provisions of assistance. In 1985 a special unit called [...]
8.1 As Thailand’s financial crisis triggered a series of economic difficulties in several East Asian countries, it is worth investigating the causes in detail. To be included as well are socio-political characteristics and private-public interactions, some of which are common across Asian cultures.
8.2 Two central policy issues, exchange rate and handling of problems at [...]
7.1 In 1998 and 1999 the U.S. Federal Reserve is likely to raise its interest rate because of the following reasons. Thus far, several economic data demonstrate that the U.S. economy is nearing the peak of its business cycle. For instance, the unemployment rate dipped to the lowest level in two decades. Elevating interest rates [...]
6.1 One very important reason why Thailand spearheaded the Asian financial crisis is that not only did a dominant portion of her external debts belong to financial markets which were highly sensitive to up-to-date news (unlike foreign direct investment), but an enormous share of those financial debts were short-term (Table 2). Making the country’s financial [...]
5.1 Ordinarily, foreign capital serves a crucial driving force in most developing countries’ economic development. The pace of economic growth in ASEAN-4 therefore slackened to a marked extent in 1997, as displayed in Table 1. Industrial countries, on the other hand, were largely unaffected. Given a prolonged recession in Japan since the bubble burst, it [...]
4.1 After periodic episodes of speculative attack in 1996, the Thai baht came under downward pressure again in January-February 1997, as currency traders questioned more about the sustainability of the U.S. dollar peg in the presence of a large current account deficit and erosion of external competitiveness due to the dollar’s continual rise against the [...]
3.1 streams of abundant capital inflows accelerated growth of private sector credits. In Thailand, for example, the growth of private sector credits rose from 20% in 1992 to 30% in 1994 or more than twice the growth rate of nominal GDP. Overheating or excessive credit growth fuelled demand expansion and raised momentum of inflation as [...]
2.1 Formats of capital inflows posed challenges in terms of their contributions to productivity and repercussions upon recipient countries’ macroeconomic policies as well as financial systems. In these respects, foreign direct investment and other long-term flows were superior to short-term flows, especially the ones into banks and other financial institutions. Unlike China and Vietnam (where [...]
1) Macroeconomic Imbalance
1.1 From a macro perspective, the strong momentum of current account deficits or savings-investment gap in Southeast Asia in the mid-1990’s was largely spurred by excessive investment funded by capital inflows. A crucial factor that contributed to the surge in capital inflows to emerging markets in the early to mid-1990’s was the decline [...]