Monetary Policy and Inflation in Thailand
Monetary policy and inflation in Thailand
By
Virinrat Sitithanasart 5445902329
Presented to
Mr. Chawaruth Musigchai
In fulfillment for the course 2952341
Course: Economics of money and financial markets
Bachelor of Art in Economics (EBA) of Chulalongkorn University, Bangkok, Thailand.
Background on monetary policy in Thailand
Monetary Policy Transmission Mechanism I investment , Consumption Domestic Monetary policy)
M YD P ฿ Export , Import (External Monetary policy)
This picture shows the monetary policy Transmission mechanism within flexible exchange rate regime.
To explain about Domestic Monetary Policy and External Monetary Policy, The last target in the economy is output and price. M increase means expansionary monetary policy and M decrease mean tight monetary policy. Expansionary monetary policy aims to increase aggregate demand and economic growth in the economy. It involves cutting interest rates or increasing the money supply to boost economic activity. In Domestic monetary policy, lower interest rates make it cheaper to borrow; this encourages firms to invest and consumers to spend. Moreover, it reduces the cost of mortgage interest repayments. This gives households greater disposable income and encourages spending. Lower interest rates reduce the incentive to save. However, in external monetary policy, using expansionary monetary policy reduce the value of baht according to lower interest rate making exports cheaper and increase export demand. So, the demand of good and service in the overall economy will increase. Excess demand of good and service will adjust price to increase also.
Monetary policy framework
The monetary policy framework in Thailand can be divided into three periods as follows. The first monetary policy regime was the pegged exchange rate. This regime had been adopted after the Second World War. However, when a greater degree of international capital flow has been
By
Virinrat Sitithanasart 5445902329
Presented to
Mr. Chawaruth Musigchai
In fulfillment for the course 2952341
Course: Economics of money and financial markets
Bachelor of Art in Economics (EBA) of Chulalongkorn University, Bangkok, Thailand.
Background on monetary policy in Thailand
Monetary Policy Transmission Mechanism I investment , Consumption Domestic Monetary policy)
M YD P ฿ Export , Import (External Monetary policy)
This picture shows the monetary policy Transmission mechanism within flexible exchange rate regime.
To explain about Domestic Monetary Policy and External Monetary Policy, The last target in the economy is output and price. M increase means expansionary monetary policy and M decrease mean tight monetary policy. Expansionary monetary policy aims to increase aggregate demand and economic growth in the economy. It involves cutting interest rates or increasing the money supply to boost economic activity. In Domestic monetary policy, lower interest rates make it cheaper to borrow; this encourages firms to invest and consumers to spend. Moreover, it reduces the cost of mortgage interest repayments. This gives households greater disposable income and encourages spending. Lower interest rates reduce the incentive to save. However, in external monetary policy, using expansionary monetary policy reduce the value of baht according to lower interest rate making exports cheaper and increase export demand. So, the demand of good and service in the overall economy will increase. Excess demand of good and service will adjust price to increase also.
Monetary policy framework
The monetary policy framework in Thailand can be divided into three periods as follows. The first monetary policy regime was the pegged exchange rate. This regime had been adopted after the Second World War. However, when a greater degree of international capital flow has been