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This paper uses new microdata to examine competing explanations of the current crisis in Thailand. The paper presents the survey results of 1200 manufacturing firms interviewed in the last quarter of 1997 and the first quarter of 1998. The evidence shows that firms responded to the incentives generated by poor policies and built up increasingly vulnerable positions. Firms had risky financial positions, financing long-term investment with large amounts of short-term debt and sometimes with open foreign exchange positions. Before the onset of the crisis, profits were declining yet investments kept growing. By 1996 there was a tremendous increase in investment, but all too often in the `wrong capital stock'. The paper also examines firm reactions to the crisis and the constraints they face in the recovery period. Firm responses show only weak support of a credit crunch story; restricted access to credit is dwarfed by the inability to sell goods due to the fall in demand. Firms also report significant structural impediments to an export-led recover