ABSTRACT
Thailand has a strong banking sector and pegged its exchange rate for longer than most middle-income countries. This chapter describes that not only did the peg strengthen the banking sector, but that the banking sector and the fear of a banking crisis helped maintain the peg. It summarizes the history of exchange-rate policy in Thailand in 1980s and 1990s. The chapter examines the economic context of growth, trade, foreign investment, and inflation in Thailand and their influence on exchange-rate policy. Thailand had some form of pegged exchange rate up until the financial crisis of 1997, which is a longer period of time than most middle-income countries. Industrialization has transformed Thailand's Gross domestic product and trade exposure. As capital mobility increased, Thailand had more opportunities for foreign investment. Low inflation made the peg easier to maintain and improve the investment climate, helping to stimulate long-term growth. Thailand's modern politics has been an oscillation between military juntas and democratic governments.
