Competitive Devaluations—Bitter Pill or Bad Medicine?: The Case of Thailand

Devaluation and crises in emerging economies have tended to be followed by an outright economic collapse. This post-devaluation economic contraction is inconsistent with the conventional view that devaluation is expansionary/inflationary and needs to be accompanied by demand deflationary monetary and fiscal policy. This paper undertakes a detailed empirical analysis to determine whether real devaluation is contractionary rather than expansionary in the case of Thailand, which was the "trigger" country in the East Asian crisis of 1997-98.