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.
The East Asian financial crisis was the impetus for many financial cooperation initiatives within the region. This paper reviews progress in a number of areas, particularly the Chiang Mai Initiative, which aims to enhance a country's access to foreign reserves in times of stress via a series of swap arrangements in the region, and the development of the Asian Bond Market in order to increase long-term financing for deficit countries so they will not have to rely mainly on short-term foreign borrowing, as was the case prior to the crisis. A number of recommendations are made, including the setting up of a regional organization to coordinate a multilateral version of the Chiang Mai Initiative and further development of the regional currency and bond markets to increase the private sector's access to long-term financing. Given the region's huge holding of foreign reserves, the paper also recommends a much more proactive approach in managing these reserves in order to influence global financial developments. (c) 2007 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.
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