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Thailand : an assessment of alternative foreign borrowing strategies (English)

This paper assesses alternative foreign borrowing strategies for Thailand using a medium-term dynamic optimization model. The model has five sectors: rubber, other agriculture, manufacturing, services, and construction. This model is first applied to an analysis of the historical strategy taken by Thailand between 1975 and 1981. It is then solved for 1985-1992 to generate a future foreign borrowing strategy. The result shows that although Thailand may have overborrowed in the late 1970s, it can utilize moderate foreign borrowing beneficially, given its potential for strong economic performance in the next decade. This is, however, conditional on export performance as good as in the past, on raising domestic savings and on altering the structure of domestic output towards tradeable goods. An analysis of the alternative suggests that robust foreign borrowing strategies should be based on an understanding of the structure of the economy, its flexibility in adjusting to shocks, on expectations of future events, and on lenders' behavior. The endogenous and simultaneous nature of the interactions of key macrovariables cannot be overemphasized. Thus, the borrowing strategy must be made consistent with fiscal, monetary and commercial policies.


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    Kharas, Homi Hisanobu Shishido

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    Departmental Working Paper

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    East Asia and Pacific,

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    Thailand : an assessment of alternative foreign borrowing strategies

  • Keywords

    foreign borrowing;consumption;dynamic computable general equilibrium;rate of return on capital;marginal utility of consumption;real exchange rate;real effective exchange rate;grace and maturity period;deteriorating terms of trade;high population growth rate;labor force growth rate;real exchange rate movement;system of national accounts;production of investment good;relative price;base year;social accounting matrix;capital stock;nominal exchange rate;international capital market;elasticity of substitution;urban labor force;social discount rate;balance of payment;domestic price level;current account deficit;intermediate input;sensitivity analysis;rural labor force;world price index;level of consumption;factor of production;stock of capital;stock of debt;foreign exchange inflow;agriculture and service;general equilibrium model;fixed capital formation;world trade value;share of capital;cost of debt;total capital stock;term capital;rates of return;domestic capital formation;utility function parameter;labor intensive technology;import price index;aggregate capital stock;private sector income;average interest rate;terms of consumption;national income account;fixed energy price;relative domestic price;world market price;general equilibrium system;tight monetary policy;large public enterprise;domestic economic activity;debt crisis country;interest rate ceiling;offshore financial markets;food processing industry;demand for output;variable interest rate;world market share;effects of migration;payment of wage;fixed interest rate;natural population growth;tax on wage;allocation of investment;public sector resource;allocation of consumption;foreign private capital;nominal interest rate;debt service obligation;value of investment;allocation of resource;debt service ratio;economic growth rate;manufacturing export;borrowing strategy;manufacturing sector;competitive imports;balanced growth;



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Kharas, Homi Hisanobu Shishido

Thailand : an assessment of alternative foreign borrowing strategies (English). Country Policy Department discussion paper,no. CPD 8529 Washington, D.C. : World Bank Group.