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Thailand's investment-driven boom and crisis

Author

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  • David Vines
  • Peter Warr

Abstract

Analyses of the Asian crisis of 1997 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 Thailand's crisis, demonstrating the role of the investment boom of 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 generated record growth but also increased macroeconomic vulnerability. This vulnerability, combined with the trigger of an export slowdown in 1996, produced the crisis. Copyright 2003, Oxford University Press.

Suggested Citation

  • David Vines & Peter Warr, 2003. "Thailand's investment-driven boom and crisis," Oxford Economic Papers, Oxford University Press, vol. 55(3), pages 440-466, July.
  • Handle: RePEc:oup:oxecpp:v:55:y:2003:i:3:p:440-466
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    Cited by:

    1. Peter Warr, 2006. "Productivity Growth in Thailand and Indonesia: How Agriculture Contributes to Economic Growth," Working Papers in Economics and Development Studies (WoPEDS) 200606, Department of Economics, Padjadjaran University, revised Feb 2006.
    2. Hesse, Heiko, 2007. "Monetary policy, structural break and the monetary transmission mechanism in Thailand," Journal of Asian Economics, Elsevier, vol. 18(4), pages 649-669, August.
    3. Olaf Hübler & Lukas Menkhoff & Chodechai Suwanaporn, 2008. "Financial Liberalisation in Emerging Markets: How Does Bank Lending Change?," The World Economy, Wiley Blackwell, vol. 31(3), pages 393-415, March.
    4. Peter Warr, 2009. "Poverty Reduction through Long-term Growth: The Thai Experience," Asian Economic Papers, MIT Press, vol. 8(2), pages 51-76, Spring.
    5. Driffield, Nigel & Pal, Sarmistha, 2006. "Do external funds yield lower returns?: Recent evidence from East Asian economies," Journal of Asian Economics, Elsevier, pages 171-188.
    6. Sajid Anwar & Desh Gupta, 2006. "Financial Restructuring and Economic Growth in Thailand," Global Economic Review, Taylor & Francis Journals, vol. 35(1), pages 113-127.
    7. Jongwanich, Juthathip & Kohpaiboon, Archanun, 2008. "Private Investment: Trends and Determinants in Thailand," World Development, Elsevier, vol. 36(10), pages 1709-1724, October.
    8. Juthathip Jongwanich, 2006. "Exchange Rate Regimes, Capital Account Opening and Real Exchange Rates: Evidence from Thailand," Departmental Working Papers 2006-01, The Australian National University, Arndt-Corden Department of Economics.
    9. Peter Warr, 2011. "Thailand’s Development Strategy and Growth Performance," WIDER Working Paper Series 002, World Institute for Development Economic Research (UNU-WIDER).

    More about this item

    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, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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