THAILAND, FINANCIAL CRISIS AND MONETARY POLICY

Abstract

This article interprets the financial crisis that started in July 1997 in Thailand as a failure of monetary policy. The traditional policy regime of fixed exchange rate and high interest rates that had served Thailand well in the past, was inconsistent with the international mobility of capital in the 1990s. A better combination of exchange rate and interest policies will have to be established in order to contribute to the recovery and renewed growth. The article questions whether the inflation targeting now being considered will serve that purpose.