An Empirical and Theoretical Study on the Wider Use of Local Currencies in the Asia-Pacific Region after the Asian Financial and Currency Crisis: An analysis focused on Thailand

The Asian financial and currency crisis triggered a significant change to the currency composition of private liabilities in Thailand. Namely, the Thai private sector switched the denominations from the US dollar to the yen and at a larger percentage to the home currency (the Thai baht). The private sectors elsewhere in the Asia-Pacific region also switched from the US dollar to home currencies. Japanese banks resident in Thailand increased their local claims in the Thai baht; Japanese banks also increased the share of local currencies elsewhere in the Asia-Pacific region; and the same is true with the non-Japanese banks as they increased the share of local currencies in the region. Countries in the region examined the crisis and their heavy dependency on the US dollar. Their currency switch can be construed as a movement away from that dependency. The author believes that such a movement should not be temporary, but should firmly take root.