First Generation Speculative Attack

The Thai financial crisis of 1997 was one of the major financial crises in the late 20th century that provoked the Asian financial crisis of 1997-1998. The Thai financial crisis revealed the weakness of the national economy of Thailand in face of the currency speculation and the risk of the rapid change of the currency rate. In this regard, it is worth mentioning the fact that the currency policy became one of the major causes of the Thai financial crisis of 1997.

In fact, the Thai financial crisis had started when the Thai government decided to float the national currency, baht. However, the national financial market had proved to be unprepared to such a step in the currency policy and the national currency had dropped unexpectedly wreaking havoc in the financial market and undermining not only the financial stability in Thailand but also deteriorating consistently the economic development of the country. The rapid drop of the national currency provoked the devaluation of the income of Thai people. In addition, the country suffered from the shortage of foreign exchange.

In addition, the inadequately developed financial market of Thailand and the lack of the effective regulation of the financial market became another important cause of the financial crisis in 1997. In this regard, the position and policy of the International Monetary Fund proved to be also of the utmost importance in the development of the financial crisis in Thailand. Moreover, speculations provoked havoc in the financial market and led to the downfall of the Thai financial market.
Thus, the Thai financial crisis was one of the first crises provoked by speculations at the national level.