A Study On The Impact Of Exchange Rate Regime On Thailand 's Foreign Trade

Recalling the past 30 years, the world was experiencing rapid globalization. In the beginning, Thailand pegged its currency exchange rate to US dollar in order to accelerate its economic development. However, due to deregulation of Thailand currency exchange rate market and liberalization capital investment, Thailand’s economy has experience long-term economic imbalance. Finally, the Asian Financial Crisis has occurred in addition of the act from international currency speculation. This crisis had forced Thailand give up its pegged currency policy in 2nd July 1997 and moved towards floating currency exchange policy.As Thailand’s economic development is dependent on international trade, export trading is main source of income for Thailand economy. Fixed exchange rate has provided stability to Thailand economy. However during the economic high growth period, the very stability also constrained the development of Thailand economy. Due to US dollar against other major currencies rises, Thai Baht followed US dollar to inflate and directly reduces the Thailand export trading competitiveness. The result of export competitiveness drop caused a bigger gap in Thailand trade balance. Moreover, Thailand mainly depends on international trading to grow the economy but the export goods seriously in lack of self-developed design, low in technology content, limited profit margin products and most of the products are average low standard. Since the structure of South East Asia export trading and export target are very similar, it makes Thailand export competitive going down. As Thailand historical experience describes the currency exchange rate directly influences the main parameters of international trading, many government officers and economists are paying attention to this topic.The post-Asian financial crisis Thailand has changed its 14-year long pegged to US dollar floating policy and it becomes a meaningful event in the evolution of Thailand currency exchange policy. This thesis focus on the how the currency exchange rate policy change has affected Thailand international trading between the 28 years period from 1984 to 2011.This thesis begins with the categorization of currency exchange policy and basic explanation of the effect of each policy would bring in theory. The second section introduces the evolution Thailand currency exchange rate policy and analyses how the policy change and its ties with financial crisis. The next section emphasizes on the influences of currency exchange policy on Thailand developing international trading and compares these economic influences over the span of 14 years before and after financial crisis. This research can be divided into 3 layers: The first layer uses foreign reserve as a metric to analyze how the policy change has influences Thai Baht currency exchange rate; The second layer applies international trade balance, service trading and capital projects data to analyze the influences of currency exchange policy change on the size of Thailand trading; The third layer digs more deeply into the factors of currency exchange rate influences through the analysis of export goods structure and export target. The final sections presents the findings and discussion on different policy for countermeasure (in terms of treasuries, currency, trades and finance) under two different currency exchange policies implemented. This section provides suggestions to improve Thailand currency exchange policy to strengthen the economy and currency cooperation between China-Thailand and East Asia. Moreover, more improvised countermeasures of currency exchange policy will be presented to strengthen Thailand economic growth and served as an example for other developing countries.