Tuesday, June 24, 2008
Reference: Striking a good balance, Bangkok Post, June 25, 2008
It is reported that Thailand's central bank is formulating plans to control inflation by increasing interest rates (Striking a good balance, Bangkok Post, June 25, 2008). This monetarist tool applies when inflation is driven by consumer demand in a surging economy and may not apply when inflation is imposed by external shocks in a stagnant economy. In that case, the monetarist medicine may be worse than the disease as we have seen during the stagflation years in America some years ago.