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Financial sector policy in Thailand : a macroeconomic perspective


  • Easterly, William
  • Honohan, Patrick


The recent Thai boom has been accomplished in an economy with considerable openness to external forces. Despite the fiscal correction achieved during 1986-89, the domestic demand expansion has made itself felt in a widening of the current account deficit. While this deficit partly reflects the need for a surge of capital expenditure to avail of export prospects and to provide the necessary infrastructure, care will have to be taken to ensure that investment does not get too far out of line with the long-run savings potential of the economy. The ability of the Thai financial sector to provide the investible funds that are demanded by the boom is influenced by its ability to mobilize savings, by official policy regarding credit allocation and by the degree to which capital is free to flow internationally. Resource mobilization in Thailand is impressive : its liquidity ratio is surpassed by only a handful of developing countries. The authors have made a number of recommendations for the further development of monetary policy instruments and for the recasting and reduction of quasi-fiscal and credit allocation impositions on the financial system.

Suggested Citation

  • Easterly, William & Honohan, Patrick, 1990. "Financial sector policy in Thailand : a macroeconomic perspective," Policy Research Working Paper Series 440, The World Bank.
  • Handle: RePEc:wbk:wbrwps:440

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    References listed on IDEAS

    1. Jonathan S. Skinner, 1987. "Taxation and Output Growth: Evidence from African Countries," NBER Working Papers 2335, National Bureau of Economic Research, Inc.
    2. Beck, Morris, 1979. "Public Sector Growth: A Real Perspective," Public Finance = Finances publiques, , vol. 34(3), pages 313-356.
    3. Peltzman, Sam, 1980. "The Growth of Government," Journal of Law and Economics, University of Chicago Press, vol. 23(2), pages 209-287, October.
    4. Ram, Rati, 1986. "Causality between Income and Government Expenditure: A Broad International Perspective," Public Finance = Finances publiques, , vol. 41(3), pages 393-414.
    5. Pathirane, Leila & Blades, Derek W, 1982. "Defining and Measuring the Public Sector: Some International Comparisons," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 28(3), pages 261-289, September.
    6. Pluta, Joseph E, 1981. "Real Public Sector Growth and Decline in Developing Countries," Public Finance = Finances publiques, , vol. 36(3), pages 439-454.
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    Cited by:

    1. Jansen, W. Jos, 2003. "What do capital inflows do? Dissecting the transmission mechanism for Thailand, 1980-1996," Journal of Macroeconomics, Elsevier, vol. 25(4), pages 457-480, December.


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