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The paper studies monetary policy and the monetary transmission mechanism in Thailand in light of the Asian crisis in 1997. Existing studies that adopt structural vector auto-regression (VAR) approaches do not give a clear and agreed-upon view how monetary shocks are transmitted to the Thai economy that is subject to structural breaks. This study explicitly models a pre-crisis and post-crisis cointegrated VAR model. This analysis supports arguments that the trinity of open capital markets, pegged exchange rate regime, and monetary policy autonomy is inconsistent in the pre-crisis period. In contrast, the model points to an effective monetary policy in the post-crisis period. Further, the author analyzes the common driving trends of the model.

Central bank --- Currencies and Exchange Rates --- Debt Markets --- Economic Stabilization --- Economic Theory and Research --- Emerging Markets --- Exchange rate --- Finance and Financial Sector Development --- Foreign interest rate --- Interest rates --- Macroeconomics and Economic Growth --- Monetary expansion --- Monetary policy --- Monetary shocks --- Money supply --- Private Sector Development --- Transmission mechanism --- Transmission mechanisms

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January 2000 - No - there is no systematic association between interest rates and the outcome of speculative attacks. Drawing on evidence from a large sample of speculative attacks in industrial and developing countries, Kraay argues that high interest rates do not defend currencies against speculative attacks. In fact, there is a striking lack of any systematic association between interest rates and the outcome of speculative attacks. The lack of clear empirical evidence on the effects of high interest rates during speculative attacks mirrors the theoretical ambiguities on this issue. This paper - a product of Macroeconomics and Growth, Development Research Group - is part of a larger effort in the group to study the causes and consequences of financial crises. The author may be contacted at akraay@worldbank.org.

Balance Of Payments --- Central Bank --- Currencies and Exchange Rates --- Debt Markets --- Economic Stabilization --- Economic Theory and Research --- Emerging Markets --- Finance and Financial Sector Development --- Financial Literacy --- Fixed Exchange Rate --- Fixed Exchange Rates --- Fixed Nominal Exchange Rates --- Foreign Exchange --- Growth Rates --- Interest Rate Differentials --- Interest Rates --- International Capital Flows --- International Monetary Fund --- Macroeconomic Management --- Macroeconomics and Economic Growth --- Monetary Authorities --- Monetary Authority --- Monetary Economics --- Monetary Policy --- Monetary Shocks --- Nominal Exchange Rate --- Private Sector Development --- Real Exchange Rate --- Real Interest Rates --- Tight Monetary Policy