because of its quick growth and the

because of its quick growth and the US dollar- baht peg. The Thai government embarked on excessive official spending and encouraged the country’s banks to lend generous amounts of money for private real estate and other spending (Ciminero, 1997). Inclusively, liberalization of the financial sector encouraged domestic companies to borrow extensively from foreign countries. Companies in Thailand borrowed large sums of money as the economy boomed (see figure 2).
Most of the loans were made in US dollars because interest rates were much lower than the Thai currency. By borrowing money from a country where the interest rate is lower, Thailand assumed it would profit from the lower interest rate. Since the exchange rates were pegged against the US dollar, companies were not concerned with having to earn domestic currency to repay the loans in dollars. Unfortunately, the weakness of the US dollar at the time masked the weaknesses in the Thai economy. As the US dollar appreciated, Thailand