Question

When the Thai government pegged the baht against the dollar, a surplus of baht flooded the foreign exchange markets. This occurred because the baht was pegged too high in value against the dollar. As a result, what did the Thai central bank do?

Answer 1

The Thai central bank took several actions in response to the pegging of the baht too high against the dollar, including seeking support from the IMF, tightening monetary policy, and tightening fiscal policy.

Step-by-step explanation:

The Thai central bank took several actions in response to the crisis caused by the baht being pegged too high against the dollar:

• The government appealed to the International Monetary Fund (IMF) for support and entered into an agreement with them.
• The central bank tightened monetary policy by raising interest rates to make the baht more attractive to investors, both local and foreign.
• Thailand also agreed to tighten fiscal policy in preparation for restructuring its banking system.