Exchange Rate Regimes, Capital Account Opening and Real Exchange Rates: Evidence from Thailand

Juthathip Jongwanich

Departmental Working Papers from The Australian National University, Arndt-Corden Department of Economics

Abstract: This paper examines the roles of pegged exchange rate regime and capital account opening inducing persistent RER appreciation in the lead-up to the 1997 currency crisis in Thailand. The three-sector (primary, manufacturing, and nontradable) economy-wide model is constructed and policy simulation experiments are undertaken. Key findings are imposing capital control under a pegged exchange rate regime would have averted the persistent internal RER appreciation and boom in nontradable sector. However, it would not have averted persistent external RER appreciation. Exports and output would have eventually declined because of the capital shortage. A freely floating regime only with a high developmental level of foreign exchange and financial markets would have been able to avert both persistent internal and external RERs appreciation. The export and output would have eventually increased. However, this regime would have generated fluctuations in domestic prices and output. The managed floating regime (combined with inflation targeting) would have helped reduce such adverse effects while retaining the benefit from exchange rate flexibility. In a context where the foreign exchange and financial markets are not well developed, capital control measures could be beneficial to ensure smooth functioning of a managed floating regime.

Keywords: Exchange rate regime; Capital account; and Real exchange rate (search for similar items in EconPapers)
JEL-codes: F32 F41 O11 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2006
New Economics Papers: this item is included in nep-fmk, nep-ifn, nep-mon and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://crawford.anu.edu.au/acde/publications/publ ... /wp-econ-2006-01.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pas:papers:2006-01

Access Statistics for this paper

More papers in Departmental Working Papers from The Australian National University, Arndt-Corden Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Prema-chandra Athukorala ().