Political Instability and the Effectiveness of Economic Policies: The Case of Thailand from 1993-2013
Jonathan E. Leightner
Hull College of Business Administration Georgia Regents University, Georgia, USA
Tomoo Inoue
Faculty of Economics Seikei University, Kichijoji-kitamachi, Musashino-shi Tokyo, Japan
Keywords: Fiscal policy, Monetary policy, Trade policy, Thailand, Omitted variables.
Abstract
Between 1993 and 2013, the Thai economy suffered from massive changes in its economy, political situation, and external environment. Given data constraints and the rapidity of the changing situation, it is impossible to create an adequate macroeconomic model for Thailand during this time period. Thus we use a statistical method designed to solve the omitted variables problem with regression analysis. This method produces a separate slope estimate for every observation which makes it possible to see how omitted variables are affecting the estimated relationships over time. We use this method to estimate dGDP/dG, dGDP/dMB, dGDP/dX, dGDP/de, and dGDP/dReserves using quarterly Thai data from 1993 to 2013 where GDP is gross domestic product, G is government consumption, MB is the monetary base, X is exports, e is the baht/US$ exchange rate, and Reserves are foreign reserves. We find that the pro-equality policies of the Thaksin regime were helpful and that export driven growth is no longer a viable option for Thailand. Although we approve of Thaksin’s economic policies, we disapprove of other aspects of his regime.