Asia Financial Crisis Flashcards
1
Q
What happened to the Thai Bhat?
A
There was a building bubble, and the interest rates in Thailand were higher than in the US. Thailand began borrowing money from the US and loaning in out in their own country, and then switched to a floating exchange rate. This devalued their currency, and made it difficult for them to pay their loans back, triggering a currency crisis that spread throughout Asia.
2
Q
What did Thailand do to fix this, and why was it not ideal? How did countries avoid this measure in the future?
A
Borrowed from the IMF, who imposed conditions. Asian countries began accumulating large stocks of reserves so that they would never need to borrow from the IMF again.
