Thailand’s Investment-Driven Boom and Crisis
David Vines
Peter Warr, Australian National University
Abstract
Analyses of the Asian crisis have focused excessively on the financial sector, especially the banks. The role of the real sector in exposing the financial system to stress has been under-emphasized. This paper provides a real-sector explanation for the Thai crisis of 1997, demonstrating the role of the investment boom which occurred over the preceding decade. We build a full macroeconomic model of the Thai economy and use it to demonstrate that the investment boom and its changing composition produced record growth but also increased macroeconomic vulnerability which, combined with the trigger of an export slowdown in 1996, caused the crisis.
Keywords: Thai crisis, currency crisis, macroeconomic model, vulnerability
Date: December 2000 | Reference number(s): 51
Series: Department of Economics Discussion Paper Series
JEL Classifications: F32, F34, O16.