By The 1980'S And Into Most Of The 1990'S, The Asian Marketplace

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By the 1980 's and into most of the 1990 's, the Asian marketplace in its entirety could have been seen as nothing less than a miracle. Business 's were booming, and economies in the region enjoyed a GDP growth rate nearing about 10% per year – which was about 4 to 5 times the growth rate of the US economy at the time. This began in the '80 's when foreign investments in most Asian countries began to increase. Stable governments were luring foreign investors, with the promise of high returns, and currencies that were tightly pinned to the US dollar that began throwing money into the ASEAN-5 (Indonesia, Malaysia, the Philippines, Singapore, and Thailand). Excitement in foreign investment greatly helps those foreign economies which …show more content…

As the economy in Thailand began to slow, foreign confidence in it began to falter as well. Just like many other currencies, the value of Thai currency (the Baht) had been pegged to the US dollar in order to ensure stability. At the time, however, the robust US economy was raising the value of the dollar, therefore the value of the baht, causing some foreign investors to believe that it was overvalued. Investors began selling the baht in exchange for the US dollar because the dollar 's value had a more certain future. Speculators jumped on the bandwagon and began selling their supply of baht in record amounts in order to lower its value and realize a profit. In July of 1997, Thailand 's central bank devalued the baht – or unpegged and lowered its value from the dollar in an effort to stop the sudden and massive sell off in order to restore confidence in the currency. When used in non-emergency situations, devaluation of a country 's currency can work to its advantage. When Thailand devalued the baht, it was able to lower the price of Thai goods in US dollar terms, which made making those products more competitive in foreign markets. Devaluation also tends to attract foreign investment in the country. However, this created an emergency situation, and devaluation of the baht only revealed the fundamental weaknesses in the Thai economy and banking system which continued in the domino effect to other Asian countries. Devaluation is good in terms

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