Answer the following questions for the "Thailand: an Imbalance of Payments" case:

1.Examine Exhibit 3 and track changes in imports of machinery and equipment. Would such a record be possible under floating exchange rate regime? Why or why not?

2.What was the major reason to borrow funds abroad for the Thai corporate sector in the first half of the 1990s? What implications do such borrowings have on the balance of payments?

3.Examine Exhibit 4B. How does Thailand finance current account deficit?

4.What does the negative sign on the reserves assets account in 1990-1996 in Exhibit 4B tell you? Is the country accumulating or depleting reserves?

5.Within the framework of Fixed Exchange Rate-Capital Account Restrictions-Independent Monetary Policy, which policy tools did Thailand choose to maintain equilibrium in June 1997? Why did it fail?

6.Previously, the rule of thumb was that if a country has foreign exchange reserves sufficient to cover 3 months of imports, it was in good shape. Why is this no longer the case and why is this not the case for Thailand with reserves worth $38 billion in the spring of 1997?