ABSTRACT
There are multiple causes to a major financial crisis. The case of Thailand shows the conditions under which the real estate sector can become a major source of vulnerability in a rapidly growing emerging economy. However, before analyzing how the Thai real estate boom and bust has been a major contributor to the Thai crisis, it may be helpful to step back briefly and to consider where the Thai experience fits into evolving views of the causes of financial crises. The recent events of Mexico, then Asia, soon followed by Russia and Brazil, have convinced economists that a fully satisfactory and comprehensive explanation of financial and currency crises in small, open economies remains a work in progress. It is clear that the Asian financial crisis has changed prevailing explanations of what causes financial and currency crises. Since the late 1970s, a succession of explanatory models have focused on domestic and international expectations, but in different ways. Economists speak of three generations of explanations of what can lead a country into a financial crisis.
