 | Hansanti S. International finance in emerging markets: issues, welfare economics analyses and policy implications / Hansanti S., Islam S.M.N., Sheehan P. - Heidelberg: Physica-Verlag, 2008. - vii, 226 p. - (Contributions to economics). - ISBN 978-3-7908-2043-0; ISSN 1431-1933
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Chapter 1 Introduction .......................................... 1
1.1. Introduction ............................................... 1
1.2. Recent Issues in International Finance ..................... 4
1.2.1. Overview of International Financial Crises .......... 4
1.2.2. Views on the East Asian Crises ...................... 8
1.3. Statement of the Problem and Objectives of the Study ...... 10
1.3.1. Objectives of the Study ............................ 10
1.3.2. Finance and Welfare Economics ...................... 11
1.4. Book Outline .............................................. 13
PART A Literature Review - The Emerging Issues
Chapter 2 Recent Issues in International Finance:
A Literature Review .................................. 21
2.1. Introduction .............................................. 21
2.2. Financial Liberalisation: Sequence and Order .............. 21
2.2.1. Overview ........................................... 22
2.2.2. Sequence and Order of Financial Liberalisation:
A Literature Review ................................ 23
2.3. Capital Controls .......................................... 26
2.3.1. Controls on Capital Outflows ....................... 27
2.3.1.1. Preventive Controls on Capital Outflows .......... 27
2.3.1.2. Curative Controls on Capital Outflows ............ 28
2.3.2. Controls on Capital Inflows ........................ 29
2.4. Exchange Rate Policy ...................................... 30
2.4.1. Factors Influencing a Choice of Exchange Rate
Policy ............................................. 31
2.4.2. Overview of Fixed and Flexible Exchange Rate ....... 32
2.5. Asymmetric Information .................................... 35
2.5.1. Asymmetric Information: An Overview ................ 36
2.5.2. Theory of Adverse Selection ........................ 37
2.5.3. Theory of Moral Hazard ............................. 39
2.5.4. Financial Crises and Asymmetric Information ........ 41
2.6. Summary ................................................... 44
Chapter 3 Overview of Thailand's Approach to Financial
Liberalisation ....................................... 47
3.1. Introduction .............................................. 47
3.2. Thailand's Economic Development ........................... 48
3.2.1 The Six National Development Plans .................. 48
3.3. History of Thailand's Economic Growth ..................... 51
3.4. Forces Influencing Financial Liberalisation in Thailand ... 53
3.4.1. Internal Forces .................................... 53
3.4.1.1. Export-Led Growth Policy .................. 53
3.4.1.2. Acceptance of the IMF Article VIII ........ 54
3.4.1.3. A Sound Fiscal Condition .................. 55
3.4.2. External Forces .................................... 56
3.4.2.1. Opening of Neighbouring Economies ......... 56
3.4.2.2. The Trend Towards Globalisation of the
Financial System .......................... 57
3.5. Financial Liberalisation Framework ........................ 58
3.5.1. Trade Reforms and Interest Rate Deregulation ....... 58
3.5.2. Relaxation of Exchange Rate and Capital Controls ... 60
3.5.3. The Establishment of International
Financial Facilities ........................ 61
3.5.3.1. The Establishment of the Bangkok
International Banking Facilities (BIBF) ... 61
3.5.3.2. The Export-Import Bank .................... 62
3.6. Summary ................................................... 64
PART B The Thai Experience
Chapter 4 Analysis of Sequencing of Financial Liberalisation
in Thailand .......................................... 69
4.1. Introduction .............................................. 69
4.2. Reforms of Foreign Trade Pattern .......................... 70
4.3. Reduction of Deficits and Maintaining Foreign Reserve ..... 73
4.4. Foreign Exchange and Capital Control Reforms .............. 77
4.5. Domestic Financial Reforms ................................ 82
4.6. Summary ................................................... 86
Chapter 5 Capital Controls: Consequences of Financial
Liberalisation ....................................... 89
5.1. Introduction .............................................. 89
5.2. Pattern of Net Private Capital Flows ...................... 90
5.3. Characteristics of Thailand's Capital Flows ............... 95
5.3.1. Capital Flows to Banking Sector .................... 95
5.3.1.1. Capital Flows of Commercial Banks ......... 95
5.3.1.2. Capital Flows of the BIBF ................. 99
5.3.2. Capital Flows to Non-bank Sector .................. 102
5.3.2.1. Capital Flows as Foreign Direct
Investment (FDI) ......................... 103
5.3.2.2. The Loan Component of Capital Flows ...... 107
5.3.2.3. Capital Flows as Portfolio Investment .... 109
5.3.2.4. Capital Flows of the Non-resident
Account .................................. 113
5.4. Summary .................................................. 115
Chapter 6 Exchange Rate Policy and Its Consequences ........... 117
6.1. Introduction ............................................. 117
6.2. Exchange Rates and Their Determination ................... 117
6.3. Overview of Thailand's Exchange Policy ................... 119
6.4. Development of Thailand's Basket of Currencies ........... 121
6.5. Consequences of the Basket of Currencies ................. 122
6.5.1. Impacts of a Pegged Exchange Rate to Trade
Growth ............................................ 122
6.5.2. Surge in Funds to Thailand's Financial Market ..... 131
6.5.2.1. Commercial Banks' Source of Funds ........ 132
6.5.2.2. The BIBF's Sources of Funds .............. 138
6.6. Summary .................................................. 143
PART C Welfare Economies, Economic Theory and Policy
Chapter 7 Review of Financial Liberalisation Theory
and the Thai Crisis ................................. 147
7.1. Introduction ............................................. 147
7.2. Inappropriate Sequence of Liberalisation ................. 150
7.3. Loosening Controls over the Capital Account .............. 155
7.4. Problems of Stable Exchange Rates ........................ 157
7.5. Asymmetric Information: Problems of Moral Hazard ......... 161
Chapter 8 A Cost Benefit Analysis Model for Globalisation:
Some Social Welfare Implications of Thailand's
Globalisation Process ............................... 165
8.1. Introduction ............................................. 165
8.2. Overview of Globalisation and the Thai Experience ........ 167
8.3. Welfare Economics Framework for Globalisation ............ 168
8.3.1. The Elements ...................................... 168
8.3.1.1. A General Welfare Economics Framework .... 168
8.3.1.2. Applications to Globalisation ............ 171
8.3.2. Social Choice Theory .............................. 172
8.3.3. A System Analysis ................................. 172
8.3.4. Issues in the Application of the Framework ........ 172
8.4. Costs and Benefits of Globalisation ...................... 173
8.4.1. Illustrative Numerical Estimation of the Costs
and Benefits of Globalisation ..................... 173
8.4.1.1. Benefits ................................. 174
8.4.1.2. Costs .................................... 174
8.4.2. Numerical Application: Methodology, Data and
Results ........................................... 176
8.4.2.1. GDP Index ................................ 176
8.4.2.2. GDP Adjustment Data ...................... 177
8.5. Welfare Implications of Globalisation .................... 180
8.6. Conclusions .............................................. 181
Chapter 9 Conclusions and Policy Implications ................. 183
9.1. Conclusions .............................................. 183
9.2. Policy Implications ...................................... 190
9.3. Areas for Further Research ............................... 192
9.4. Final Comments ........................................... 193
References .................................................... 195
Appendix A Regulatory Agency .................................. 217
Appendix B Articles of Agreement of the IMF ................... 219
Appendix C Chronology of Financial Reforms in Thailand ........ 223
Index ......................................................... 225
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