Thailand's Currency Crisis
From Dickinson College Wiki
ABOUT THAILAND'S CRISIS
- Origins
- Describe what this means for the country and economy
- July 1997: currency turmoil erupted in Thailand
- Thailand > Indonesia and Korea > Russia > Latin America
- this Asian crisis pushed one-third of the globe into recession during 1998
- fixed exchange rate regime
- Economic theory suggests that a pegged exchange rate regime can become vulnerable when cross-border capital flows are highly mobile.
- A central bank that pegs its exchange rate to a hard currency implicitly guarantees that any investors can exchange their local currency assets for that hard currency at the prevailing exchange rate. If investors suspect that the government will not or cannot maintain the peg, they may flee the currency; this capital flight, in turn, delete hard currency reserves and force the devaluation they fear.
