The Collapse of the Thai Baht

Paper Summary:

The paper shows that more than two years after its collapse, the state of the Thai Baht was still being discussed as one of the crucial economic international events of 1997, one that threatened to bring the world's developing economies to the brink of chaos. The paper investigates the cause of this crisis and the results which are still felt today.

From the Paper:

"However, this bubble, created by industrial expansion and an overvalued currency, could not last indefinitely. Thai domestic factors began to come into play. The country began to be marked by rising wages of low-skilled laborers and consequent cost increases in production of exportable goods. This eroded Thai competitiveness in labor-intensive goods vis-a-vis late-starting industrial states such as China and Vietnam. Thailand's trade deficit mounted. Also, newly-rising industrial states such as China and Vietnam were attracting new and greater rates of foreign investment, diverting funds that had once been invested in Thailand for the same purposes. Thai exports, which recorded a hefty growth of 24% in 1995, flattened to an almost negligible percentage a year before the baht's collapse."

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