baht, was pegged." (direct from the IMF document) Thailand's success was also responsible for it's problems. The growth and good macroeconomic management attracted large short-term capital inflows. These inflows created faster growth and increased the amount of loans made by domestic banks. The loans were used for "imprudent investments and unrealistic asset prices." (direct from the IMF document) The Thai authority refused to make desperately needed adjustments. Talks between the Thai authorities and the IMF still didn't encourage them either. They were too overwhelmed by their recent success. This disease was highly contagious " The depreciation of the baht could be expected to erode the existing competitiveness of Thailand's trade competitors, and this put some downward pressure on the currencies." (direct from the IMF document) Because of the problems markets experienced in Thailand, they became more careful to look at Indonesia Korea and the neighboring countries problems. They saw that the same problem was happening in other countries especially in their financial sector. The currencies were still sliding and there was an increase in the debt service costs of the domestic private sector. There was an exchange rate adjustment that was more than what was required. The adjustment was more than needed to correct the initial overvaluation of the Thai baht. This was ...
