ABSTRACT
On July 2, 1997, the central bank of Thailand announced that it would abandon its fi xed exchange-rate regime, which had pegged Thai Baht to the US dollar for about 10 years. The change permitted free fl uctuation of the exchange rate between the two currencies. On the same day, the exchange rate plunged 17 percent. The incident rippled through East Asia – and many other parts of the world – and triggered the Asian fi nancial crisis, which lasted about two years and caused enormous losses to many countries, especially in Southeast Asia. Today, more than a decade later, it is possible to draw lessons from the crisis and better understand how to prevent such a crisis from happening again.
