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Does devaluation lead to economic recovery or contraction? Theory and policy with reference to Thailand
Author(s) -
Bird Graham,
Rajan Ramkishen S.
Publication year - 2004
Publication title -
journal of international development
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.533
H-Index - 66
eISSN - 1099-1328
pISSN - 0954-1748
DOI - 10.1002/jid.1056
Subject(s) - devaluation , economics , recession , currency , monetary economics , financial crisis , economic recovery , keynesian economics , currency crisis , international economics , macroeconomics , economic policy
Most analyses of the East Asian financial crisis have focused on its causes and the links between currency and banking crises. However a related question is what happens in the aftermath of a crisis? What factors determine the path of an economy in the post‐devaluation phase? Does it swiftly bounce back, with the crisis being followed by a period of economic recovery, or does it face a period of economic recession if not outright output collapse? An important element in answering these questions is to consider the response to devaluation, since this constitutes an almost invariant component of economic stabilisation. This paper examines these questions analytically as well as by using Thailand as a case study. Copyright © 2004 John Wiley & Sons, Ltd.