The 1997 financial crisis provided many lessons about the weaknesses of Thailand’s
economic and financial system before the crisis, weaknesses that eventually led to the crisis.
Since then, these lessons have led to many economic and financial reforms. This paper
reviews the lessons and reforms that have been carried out. These include improvements to the
data system needed for adequate macroeconomic monitoring, changes to the macroeconomic
management framework and monetary policy regime, and various aspects of financial sector
reforms. This paper also indicates the lessons that might not yet have been sufficiently learned
and new risks to future economic stability. These include political interference in financial
institutions, leading to inappropriate or excessive lending, and lack of transparency in fiscal
liabilities that could mislead macroeconomic management.
Key words crisis, financial sector, lessons, monetary policy, reforms
1. INTRODUCTION
The 1997 financial crisis provided many lessons about the weaknesses of Thailand’s
economic and financial system before the crisis, weaknesses that eventually led to the crisis.
Since then, these lessons have led to many economic and financial reforms. Some of the
reforms, such as the floating of the baht, were necessitated by the crisis. Others evolved from
lessons that were learnt from the crisis, and were designed to make the financial system
stronger and more resilient to risks that could lead to a similar crisis in the future. This paper
provides an overall review of the lessons and reforms that have been carried out. These
include improvements to the data system needed for adequate macroeconomic monitoring,
changes to the macroeconomic management framework and monetary policy regime, and
various aspects of financial sector reforms. Many of these reforms are still, however,
incomplete and will require additional measures or legal frameworks to make them fully
effective. The paper also indicates the lessons that might not yet have been sufficiently learned
and new risks to future economic stability. These include political interference in financial
institutions, leading to inappropriate or excessive lending, and lack of transparency in fiscal
liabilities that could mislead macroeconomic management.
The next section briefly reviews the evolution to the financial crisis in Thailand. The
paper then looks at crisis resolution measures that were adopted immediately after the crisis in
Section 3. Lessons and more fundamental reforms of monetary policy and the financial system