Thailand initially fixed its exchange rate but a slow and erratic process of financial reform brought a move to loose exchange rate targeting and eventually allowed a shift to indirect monetary instruments; the Asian financial crisis led to a float, and this was followed by inflation targeting, initially loose, harder from 2010 but looser again from 2015.

Years Targets and attainment Classification
1974-81 exchange rate fixed to USD and then from 1978 to a basket dominated by USD, very narrow spreads on bank transactions set by Exchange Equalisation Fund; monetary policy instruments include maxima on bank loan and deposit rates, reserve requirements (with banks obliged to hold government securities), selective lending operated partly through rediscount facilities; some interest rate and other liberalisation augmented exchange rate fix AERF
1982-96 July 1981 baht devalued and pegged to USD, daily fixing replaced by rather more open forex market; from November 1984 peg is determined in relation to undisclosed basket (with weight of USD increased late 1985) and ‘other considerations’, which allows small movements to counter loss of competitiveness; by mid-80s monetary policy relies more on indirect instruments including operations in repo market, but reverts to direct controls and moral suasion when thought necessary; financial markets long remain weak, especially secondary markets other than repurchase market (for government, state enterprise and central bank bonds), but early 1990s interest rate ceilings abolished and mid-90s more financial reform improves scope for indirect instruments; central bank continues to provide finance to government in varying amounts; short-lived attempts late 1980s at (internal) monetary targeting, replaced by multiple indicators-type approach; policy objectives include growth, inflation, forex reserves and external equilibrium loose exchange rate targeting
1997-99 mid-1997 Asian financial crisis leads to float of exchange rate and large depreciation only partly unwound in later quarters; central bank (which has more de facto than de jure independence) prepares for inflation targeting loosely structured discretion LSD
2000-09 wide (0-3.5%) inflation target bands attained 2000-8, 2009 narrower (0.5-3%) band missed by small margin; exchange rate managed, mainly with view to smoothing and rebuilding of forex reserves, and capital controls used briefly in face of surging inflows; regular policy rate (14-day repo rate) within corridor from 2007; central bank de jure independence improved from 2008 loose inflation targeting LIT
2010-14 2010-14 narrowish (0.5-3%) bands regularly attained, with outturns less than 1% from mid-point of band; cleaner float of exchange rate full inflation targeting FIT
2015-17 2.5% point target with wider +/-1.5% tolerance band, undershot 2015 but attained 2016 and (though undershot) 2017, with long-term Consensus inflation forecasts remaining within band but some signs of de-anchoring of expectations loose inflation targeting LIT

Selected IMF references: RED 1975 pp40-41; RED 1979 p37; RED 1981 p45; RED 1986 pp43, 45; SR 1986 p32; RED 1987 pp34-6; RED 1989 pp36-9; RED 1990 pp12-13; BP 1991 pp22-5; RED 1993 pp23-4; RED 1997 p13; SR 2001 pp16, 18, 30-31; SR 2002 pp7, 14; SR 2003 pp13-14, 16; SI 2007 pp50-51; SR 2007 pp14, 17-20; SR 2008 p16; SR 2015 p22; SR 2017 pp9-10, 27; SI 2017 pp2-9; SR 2018 pp11-14, 25.

Additional references: Grenville and Ito (2010); Bank of Thailand (n.d.1, n.d.2).

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