3 ms·
? That crisis was literally started by misguided attempts at currency controls (!) i.e. Thai pegging their currency to USD and unable to 'hold the wall against
by jariel 6y ago
? That crisis was literally started by misguided attempts at currency controls (!) i.e. Thai pegging their currency to USD and unable to 'hold the wall against the sea' so it eventually came crashing in.
So yes, Thailand 1997 demonstrates very effectively one of the challenges with currency controls.
Currency controls come with a cost, that has to be considered.
- pydry 6y agoCapital controls are controls what kind of capital can enter and exit the country and when - e.g. transaction taxes or exchange controls (limiting how much currency you can buy or sell). Currency pegs are when the government tries to maintain a particular value against another currency. E.g. maintaining a $ peg by buying or selling US treasuries on the open market. They are not the same thing at all. Currency pegs should probably additionally be separated into two groups, as, well - "too high" (UK and Thailand) and "too low" (China). The crisis could be characterized as an attempt to adhere to the impossible trinity: https://en.wikipedia.org/wiki/Impossible_trinity https://en.wikipedia.org/wiki/Impossible_trinity
- jariel 6y agoWhen the government is buying and selling currency at some rate commensurate with capital coming in and out of the country -> it's a capital control.
- pydry 6y agoReacting to capital leaving the country uncontrolled is not a capital control. It's a reaction to capital leaving the country uncontrolled. Fixed exchange rate regimen != capital controls.