Question

15) Although there were many important causes, one of the causes of the East Asian Financial Crisis was currency speculation. In 1997 many investors believed that the Thai baht was overvalued. This is a very difficult question. Do your best. a. If investor's thought the baht was overvalued, what should they do? b. The Thai government wanted to maintain an exchange rate of 25 baht per dollar. What would the Thai government have to do to maintain this exchange rate? Are there limits on their ability to carry out this action? Do a little bit of digging. What eventually happened to the Thai baht? The Khan academy has a helpful video if you're interested. What kind of exchange rate regime was Thailand operating in 1997 before the crisis (floating, fixed, or crawling)? c. d.

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