Financial sector policy in Thailand: a macroeconomic perspective

William Easterly and Patrick Honohan

No 440, Policy Research Working Paper Series from The World Bank

Abstract: 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.

Keywords: Economic Theory&Research; Banks&Banking Reform; Financial Intermediation; Environmental Economics&Policies; International Terrorism&Counterterrorism (search for similar items in EconPapers)
Date: 1990-06-30
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