In the late 1990s, firms in Thailand that had borrowed dollars while the baht was pegged to the dollar faced interest payments that were ________ than they had planned while the Thai government continued trying to defend the peg, because the baht had been pegged ________ the equilibrium exchange rate for the baht.

Question

Quizplus · Accepted Answer

The baht had been pegged above the equilibrium exchange rate for the baht, so when the baht was no longer pegged to the dollar, it depreciated, making the dollar-denominated debt more expensive to service.

In the Late 1990s, Firms in Thailand That Had Borrowed