Financial liberalisation and the crisis in Thailand in 1997

The last two decades have been a critical period for Thailand's development. From the mid 1980s to the beginning of the 1990s, the Thai economy performed remarkably well and was a showcase for the world economy. Having achieved a double-digit growth rate for a brief period, Thailand in the late 1980s was regarded as the fastest growing economy in the world by the World Bank and the IMF. With prospects of further rapid economic growth, the Thai government accepted Article VIII of the IMF, which required Thailand to liberalise and deregulate its financial system. Accordingly, Thailand removed most regulations on its financial system from 1989 to early 1994. Consequently, the country enjoyed further economic growth and large volumes of capital began to flow into Thailand's financial market. Unfortunately, the story of Thailand's success was short lived and soon ended, after the financial liberalisation was completed. Finally, economic growth came to a sudden stop and the crisis erupted in July 1997. This thesis investigates the contribution of financial liberalisation to the crisis in Thailand by focusing on four main issues: the sequence of financial liberalisation, capital controls, exchange rate policy and asymmetric information. In addition, this study also examines time-series data and other information to explore the consequences of financial liberalisation for the crisis in Thailand