ABSTRACT
This list, Eichengreen admits, is “wisdom after the fact” (ibid.). Thailand is an exception, though, for here the signs were clear. “Not only had Thailand’s current-account defi cit risen to an alarming 8 pct of GDP”, Eichengreen observes, “but its export performance was disappointing” (ibid). A key problem for Thailand was, Eichengreen argues, its “pegging the baht to a basket with a heavy weight on the US dollar” (ibid). “While the currencypegging was not limited to Thailand”, he continues, “only there did the leading investment analysts expect a sustained slowdown in exports”:
Refl ecting these problems, Thai equity prices trended downward and the real estate bubble burst. With the country’s fi nance companies heavily exposed to the property and stock markets, the decline in asset values posed an obvious threat to their solvency and, in turn, to the government’s commitment to the maintenance of the currency peg (Eichengreen 1999: 145)
Eichengreen stresses that the managing director of the IMF approached the Thai authorities, both by means of warning letters and by sending IMF
offi cials to Bangkok, to express their concern. “The markets, if not the Thai offi cials, took heed”: “In the nine months up to its 2 July 1997 devaluation the baht was hit by three more speculative sell-offs” (Eichengreen 1999: 148). However, even in Thailand, Eichengreen notes, there “was no indication that the market anticipated the severity of impending problems” (Eichengreen 1999: 149).
