Introduction The Bank of Thailand operates as the Central Bank for the country. Entrusted with the job of carrying out all the central banking operations of the country, the bank has its administrative center in Bangkok with three regional offices working under its supervision. The primary responsibilities of the bank include, among other things, providing effective banking facilities, supervising and controlling the foreign exchange as well as examining the economic growth of the respective regions thereby bringing about an overall improvement in the life of the people of Thailand. Historical Background Considered as the pioneer in the field of banking operations in Thailand, the Thai National Banking Bureau was established as early as 1939 as part of the Ministry of Finance. Under the impact of the World War II, the government of Thailand upgraded the status of the Bureau to that of a central bank by passing the Bank of Thailand Act in the year 1942. According to the act, the Bank of Thailand was entrusted with the responsibility of carrying out all the central banking functions (Rajan 2008). The Central Bank of Thailand aims at sustaining the economic growth of the country by providing stable economic environment. The overall supervision of the bank is in the hands of the Court of Directors comprising of the Governor, the Deputy Governors and at least five other members. The Governor and Deputy Governors are appointed by His Majesty the King of Thailand whereas the Cabinet appoints the other members on board (Nuntiyagul 2009). Thailand’s Economic Turmoil – 2006 Thailand experienced a brief period of economic instability in 2006 due to rapid appreciation of the Thai baht (Refer to Chart 1 in the Appendix below). The gradual rise of the baht posed a serious threat to the Thai economy due to its direct bearing on the country’s export sector. Thailand’s economy has been dependent, to a large extent, on its export sector which has flourished over the last few years (Rajan 2008). The increasing dependence on the export sector may be attributed to the gradual shrinking of the domestic market of Thailand. Higher oil prices and political instability have largely contributed to the decline of the domestic market. The significance of the export sector in the Thai economy can be judged from the fact that the contribution of the value of exports to the country’ GDP has risen from 30% in 1997 to 60% in 2006. Thus, the gradual appreciation of baht, if not properly stemmed, would lead to the loss of price competitiveness thereby threatening the export sector of the country (Sufian 2009). Not only that, excessive appreciation of the Thai baht would also impact the labor market, especially the agricultural sector and textiles. Unlike the high –tech industries like electronics or automobiles, these sectors lack the necessary infrastructure to cope up with the consequences of excessive baht appreciation in a limited period of time. These sectors contribute significantly to the country’s overall employment and the lack of price competitiveness for these sectors would mean mass curtailment of jobs. To warrant the gradual appreciation of the baht, the Bank of Thailand adopted a number of conventional measures like FX intervention, Interest rate policy, and Outflow liberalization as