Review of Financial Liberalisation Theory and the Thai Crisis
This book has now fulfilled two prime tasks. The first task was to review the literature on international finance related to the issues of financial crises, the sequence of financial liberalisation, capital control, exchange rate policy and asymmetric information and examine the framework undertaken by Thailand in liberalising its financial system. This first task was undertaken in Chaps. 2 and 3, which is Part A of this book. The second task of this book was to make an assessment of Thailand’s financial liberalisation taking into consideration the literature presented in Chap. 2. This was accomplished in Chaps. 4, 5 and 6, which is Part B of this book.
In this Part C which comprises Chaps. 7, 8 and 9, the aim is to provide an analysis of the contribution of Thailand’s financial liberalisation as a cause of the crisis in relation to the literature reviewed in Chap. 2 and its social welfare analysis using a cost benefit analysis framework in Chap. 8. Chap. 9 is the conclusion of this book.
This current chapter analyses the role of financial liberalisation in Thailand’s financial crisis in four major aspects. Section 7.2 studies the errors of sequence in Thailand’s financial liberalisation. Section 7.3 exam ines the impact of capital control reform. Section 7.4 presents the problems of implementing an exchange rate policy. Section 7.5 investigates the issue of asymmetric information while focusing on problems caused by moral hazard.
KeywordsForeign Exchange Commercial Bank Current Account Deficit Capital Control Current Account Balance
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