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.
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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number
051.
Find related papers by JEL classification: F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements F34 - International Economics - - International Finance - - - International Lending and Debt Problems O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment