In the mid-1990s, Indonesia, Hong Kong, Korea, Malaysia, the Philippines, Singapore, and Thailand underwent economic crises for similar reasons, but each country handled its problem differently. Thailand had the first and most severe crisis, and it is the subject of this chapter. The crisis in Thailand provides a case study of what happens when there are speculative bubbles in the real estate sector of the economy, inadequate bank supervision, and ineptitude on the part of the central bank. The problem was exacerbated because Thailand’s currency was tied to a strong U.S. dollar.
The chapter is divided into three parts. The first part provides a general description of Thailand. The next part examines the growth, prosperity, and real estate bubble that ultimately burst. The final part examines the lessons to be learned from these crises.
The Kingdom of Thailand, located in Southeast Asia, has a population of about sixty million people, and the country is about the size of Texas. It is a constitutional monarchy. Its major markets include the United States, Japan, Singapore, and Hong Kong. The Thai legal sys-