IDEAS home Printed from https://ideas.repec.org/a/wsi/serxxx/v48y2003i01ns0217590803000621.html
   My bibliography  Save this article

How Did the Bank of Thailand Respond to Capital Inflows before a Crisis? Sterilization and Base Money in the 1990's

Author

Listed:
  • Masahiro Inoguchi

    (Graduate School of Economics, Hitotsubashi University, Japan)

Abstract

This paper explores how the Bank of Thailand (BOT) responded to capital inflows through sterilization and how it changed base money before the Asian crisis. There has been no general consensus on this subject and many previous studies have not considered the definition of sterilization. In this paper, sterilization is defined as the sale of domestic assets by a central bank in order to offset an increase in base money due to the purchase of foreign assets. When the BOT does not sell domestic assets but instead changes the value of accounts that are not counted in base money on the liabilities side of the balance sheet, it can keep base money fixed without sterilization. The results of this analysis are that the BOT kept base money constant after 1994 by means of sterilization and the manipulation of liabilities not counted in base money, while prior to 1994, there was incomplete sterilization and base money was not fixed.

Suggested Citation

  • Masahiro Inoguchi, 2003. "How Did the Bank of Thailand Respond to Capital Inflows before a Crisis? Sterilization and Base Money in the 1990's," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 48(01), pages 39-60.
    • Handle: RePEc:wsi:serxxx:v:48:y:2003:i:01:n:s0217590803000621
    DOI: 10.1142/S0217590803000621
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S0217590803000621
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S0217590803000621?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Glick,Reuven & Hutchison,Michael (ed.), 1994. "Exchange Rate Policy and Interdependence," Cambridge Books, Cambridge University Press, number 9780521461108, September.
    2. Ms. Carmen Reinhart & Mr. Mohsin S. Khan, 1995. "Capital Flows in the APEC Region," IMF Occasional Papers 1995/015, International Monetary Fund.
    3. Mr. Pierre L. Siklos, 1996. "Capital Flows in a Transitional Economy and the Sterilization Dilemma: The Hungarian Case," IMF Working Papers 1996/086, International Monetary Fund.
    4. Mr. Taimur Baig, 2001. "Characterizing Exchange Rate Regimes in Post-Crisis East Asia," IMF Working Papers 2001/152, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tony Cavoli & Ramkishen S. Rajan, 2006. "Capital Inflows Problem in Selected Asian Economies in the 1990s Revisited: The Role of Monetary Sterilization," Asian Economic Journal, East Asian Economic Association, vol. 20(4), pages 409-423, December.
    2. Tony Cavoli & Ramkishen S. Rajan, 2006. "Capital Inflows Problem in Selected Asian Economies in the 1990s Revisited: The Role of Monetary Sterilization," Asian Economic Journal, East Asian Economic Association, vol. 20(4), pages 409-423, December.
    3. Menzie Chinn & Michael Dooley, 1995. "Asia-Pacific Capital Markets: Measurement of Integration and the Implications for Economic Activity," NBER Working Papers 5280, National Bureau of Economic Research, Inc.
    4. Ila Patnaik, 2003. "The Consequences of currency intervention in India," Indian Council for Research on International Economic Relations, New Delhi Working Papers 114, Indian Council for Research on International Economic Relations, New Delhi, India.
    5. Kiichiro Fukasaku & David Martineau, 1999. "Coopération monétaire en Asie de l'Est : l'apport des tests de causalité et de la cointégration," Économie et Prévision, Programme National Persée, vol. 140(4), pages 105-116.
    6. Gan-Ochir Doojav & Borkhuu Gotovsuren & Tsenddorj Dorjpurev, 2012. "Financial Contagion and Volatile Capital Flows," Occasional Papers, South East Asian Central Banks (SEACEN) Research and Training Centre, number occ56, April.
    7. Gian Maria Milesi Ferretti & Assaf Razin, 1999. "Current Account Deficits and Capital Flows in East Asia and Latin America: Are the Early Nineties Different From the Early Eighties," NBER Chapters, in: Changes in Exchange Rates in Rapidly Developing Countries: Theory, Practice, and Policy Issues, pages 57-108, National Bureau of Economic Research, Inc.
    8. Shashank Goel & V. Raveendra Saradhi, 2015. "Capital Flow Components and the Real Exchange Rate: Implications for India," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 14(2), pages 179-194, December.
    9. Cheung, Yin-Wong & Chinn, Menzie D. & Fujii, Eiji, 2003. "China, Hong Kong, and Taiwan: A quantitative assessment of real and financial integration," China Economic Review, Elsevier, vol. 14(3), pages 281-303.
    10. Robert-Paul Berben & Jan Marc Berk, 2002. "Requirements for successful currency regimes: the Dutch and Thai experiences," MEB Series (discontinued) 2002-16, Netherlands Central Bank, Monetary and Economic Policy Department.
    11. Chinn, Menzie D., 2006. "The (partial) rehabilitation of interest rate parity in the floating rate era: Longer horizons, alternative expectations, and emerging markets," Journal of International Money and Finance, Elsevier, vol. 25(1), pages 7-21, February.
    12. Sun, Lixing, 2004. "Measuring time-varying capital mobility in East Asia," China Economic Review, Elsevier, vol. 15(3), pages 281-291.
    13. Kim, Bong-Han & Kim, Hyeongwoo & Min, Hong-Ghi, 2013. "Reassessing the link between the Japanese yen and emerging Asian currencies," Journal of International Money and Finance, Elsevier, vol. 33(C), pages 306-326.
    14. Ranjanendra Narayan Nag & Sayan Baksi & Sayantan Bandhu Majumder, 2015. "Capital Flows, Asset Prices and Output in Emerging Market Economies," Foreign Trade Review, , vol. 50(1), pages 1-20, February.
    15. Holmes, Phil & Wong, Mei Wa, 2001. "Foreign investment, regulation and price volatility in South-east Asian stock markets," Emerging Markets Review, Elsevier, vol. 2(4), pages 371-386, December.
    16. Timothy Bond, 1998. "Capital Flows to Asia: The Role of Monetary Policy," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 25(2), pages 165-182, January.
    17. Takatoshi Ito, 2000. "Capital Flows in Asia," NBER Chapters, in: Capital Flows and the Emerging Economies: Theory, Evidence, and Controversies, pages 255-296, National Bureau of Economic Research, Inc.
    18. Fatum, Rasmus & Hutchison, Michael, 2006. "Effectiveness of official daily foreign exchange market intervention operations in Japan," Journal of International Money and Finance, Elsevier, vol. 25(2), pages 199-219, March.
    19. Mark M. Spiegel, 1995. "Sterilization of capital inflows through the banking sector: evidence from Asia," Economic Review, Federal Reserve Bank of San Francisco, pages 17-34.
    20. Manuel F. Montes, 1996. "Country Responses to Massive Capital Flows," WIDER Working Paper Series wp-1996-121, World Institute for Development Economic Research (UNU-WIDER).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:serxxx:v:48:y:2003:i:01:n:s0217590803000621. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/ser/ser.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.