1 AIT Asian Institute of Technology

The impact of speculation on a country's economy : the case of Thailand

AuthorChaiwat Kovavisarach
Call NumberAIT Thesis no. IE-91-18
Subject(s)Saving and thrift--Thailand
NoteA thesis submitted in partial fulfillment of the requirement for the degree of Master of Engineering, School of Engineering and Technology
PublisherAsian Institute of Technology
AbstractThe prosperity of the Thai Economy, with double-digit growth rate in recent years, has inevitably fuelled the speculative bubble. The effects of speculation in the economic system, to name a few, are; rocketing real estate prices, boom and burst of stock market, widespread illegal financial cycle or shares. A generic model reflecting a country's macroeconomy and the underlying behaviors of speculative bubble was built. Five salient macroeconomic models, namely, multiplier-accelerator, aggregate supply-aggregate demand, IS-LM, general equilibrium theory, and inventory adjustment were combined into one model with some modification to represent Thailand's macroeconomy. The resource allocation and self-reinforcement speculation process completed the speculation submodel. The model's validity was investigated through an IS-LM framework. Monetary policy and fiscal policy are two stimulus parameters. Behavior of model are also learned from these two policies. Basic run was constructed after confidence was built in the model through validity experiments, the consistency of model pattern to the theory's one. A diminishing long term investment, caused by speculative activities, prevailed, and eventually, collapsed the country's economy. Seven common policies were tested through simulation to curtail such phenomena. They are; 1) increasing government spending, 2) raising interest rate, 3) tightening monetary supply, 4) reducing taxation, 5) encouraging foreign investment, 6) taxing speculation activities, and 7) subsidizing capital investment. The combination of policy 2, 4, 6, and 7 was found to be the most beneficial policy, within the assumptions made in the model, to sustain a healthy economic growth.
Year1991
TypeThesis
SchoolSchool of Engineering and Technology (SET)
DepartmentOther Field of Studies (No Department)
Academic Program/FoSIndustrial Engineering (IE)
Chairperson(s)Saeed, Khalid
Examination Committee(s)Tang, John C.S. ;Weber, Karl E.
Scholarship Donor(s)Thai CRT Co., Ltd.
DegreeThesis (M.Eng.) - Asian Institute of Technology, 1991


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