Exchange rate_lesson from Thai Baht
The appreciation of Thai Baht and its impact on the Thailand economic performance must have reminded many of us that appreciation of a currency will bring more harm to an export-oriented economy.
While this claim has its merit, we shouldn't assume that a low value of the exchange rate is the solution for economic development. We must never forget that the impact of exchange rate on the economy depends on the characteristics of the economic system. A high-value currency should never undermine the export competitiveness of a country if their exports consist of high value-added or unique products
More importantly, over-dependence on the low exchange rate will reduce the sense of urgent of a country to upgrade the production.
The exchange rate should be market-determined and appreciation of currency should be seen as an opportunity to change the economic structure.
I will elaborate more on that in the future.
While this claim has its merit, we shouldn't assume that a low value of the exchange rate is the solution for economic development. We must never forget that the impact of exchange rate on the economy depends on the characteristics of the economic system. A high-value currency should never undermine the export competitiveness of a country if their exports consist of high value-added or unique products
More importantly, over-dependence on the low exchange rate will reduce the sense of urgent of a country to upgrade the production.
The exchange rate should be market-determined and appreciation of currency should be seen as an opportunity to change the economic structure.
I will elaborate more on that in the future.
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