Abstract:
The impressive recovery of Asia from the severe 1997-98 financial crisis has been achieved through, among other things, more flexible exchange rates, remarkable reductions of double mismatches in the banking systems, current account surpluses, increasing volumes of foreign direct investment, and accumulations of international reserves. New challenges have now come into view as the Asian economies have to deal with massive capital inflows. This paper aims to explain the overall picture of Thailand as regards the magnitude, types, allocation of capital inflows, impacts of the capital inflows on the financial system-the exchange rate and the interest rate-and impacts on the real sector of the economy. Additionally, a review of existing policies is carried out, together with a presentation of the policy challenges and further policy recommendations.
