A Comparison of the Macroeconomic Systems in China and Thailand under Impossible Triangle Theory

Abstract

Amidst the 1997 Asian financial crisis, the contrasting experiences of China and Thailand shed light on the pivotal role played by capital controls in economic resilience. This study aims to employ a mixed-method approach, combining qualitative and quantitative methods, as well as comparative analysis, to delve deeper into the dynamics at play. The central argument posited here revolves around China's effective employment of capital controls, which facilitated the preservation of a fixed exchange rate regime and the seamless execution of an expansionary monetary policy. These measures shielded China from the adverse repercussions of the financial crisis. In contrast, Thailand's excessive capital liberalization and unwavering commitment to a fixed exchange rate system stripped the country of its ability to independently manage monetary policy. Consequently, Thailand suffered devastating consequences in the wake of the crisis.