Firms in Thailand that had borrowed dollars while the baht was pegged to the dollar faced interest payments that were ________ than they had planned because the baht had been pegged ________ the equilibrium exchange rate for the baht.

Question

Quizplus · Accepted Answer

The baht was pegged above the equilibrium exchange rate, which means that the baht was overvalued. This made it more expensive for Thai firms to repay their dollar-denominated loans, as they had to buy more baht to repay the same amount of dollars.

Firms in Thailand That Had Borrowed Dollars While the Baht