It is worth noticing that the results observed in Thailand could have been different had not the economic authorities decided to ease monetary policy and to expand public expenditures beginning in late 1991. In fact, as a response to the slowdown in external demand that resulted from the slowdown in economic activity in the developed countries in recent years, and to counteract for the lower capital inflows that resulted from the Middle East crisis in 1990-91 and the political problems in Thailand during 1991-92 --that affected negatively private investment and consumption-, public expenditures in Thailand increased by more than 2 percentage points of GDP between 1990 and 1992.54 This recent increase in public expendiures also resulted from the need to solve the bottlenecks in infrastructure that developed during the fast growing period (1987-90). Also monetary policy was eased in September 1991 when the Bank of Thailand lowered its discount rate by 1 percentage point.

# 6. Economic Policy: Some Lessons

The countries analyzed in this paper have implemented different policies to compensate for the monetary and real effects of the surge in capital inflows of recent years. The outcome has been different for each country and the degree of success vanes among them. In this section we attempt to summarize the most important findings by comparng the nine country experiences. Table 10 below shows the different policy-mix used by each of the countries included in the sample, while tables 11 and 12 summarize the outcome in some key macroeconomic variables for all the countries in the sample.

Concerning the outcome in each of the countries there are some important general facts fhat are worth noticing.

First, it can be argued that all the countries have been successful in avoiding a permanent and significant increase in inflation. In fact, in Argentina and Mexico inflation has been decreasing for the past three to four years, while in the other seven countries inflation has remained fairly stable. Although in the case of Malaysia inflation seems to be increasing during the last two years, it is also true that Malaysia shows the lowest inflation rate among all of the countries in the sample.

* Second, in terms of the pattem shown by the real exchange rate, we can spl;t our sample into two different groups. In the first group we include Chile, Indonesia, and Malaysia, which have avoided a significant real exchange rate appreciation (Malaysia shows a real depreciation). In the second group we include Argentina, Korea, Mexco, ana the Philippines which have had a strong appreciation of the real exchange rate. Thailand lies in between these two groups.

* Third, the countries that have received the largest capital inflows (as a percentage of GDP, see Table 12) on average during 1989-92, arm not those that have experienced the largest real exchange rate appreciation. In fact the largest recipients of capital inflows (Thailand, Maaysia and Chile), have experienced either a depreciation or a low appreciation of their currencies. It is important to note that Thailand has experienced a lower appreciation thafi Korea in spite of receiving a much larger capital inflow. Also, during 1986-90 the RER in Thailand appreciated only 4.8%Mo, aid it began appreciating faster in 1991-92 after the government decided to easy monetary and fiscal policy as a response to the slowdown in aggregate demand.

- Fourth, those countries that show a decreasing pattem of government consumption -as a percentage of GDP- are also those that show a lower real exchinge rate appreciation (Malaysia, Chile and

- 54 Ovrall public seor expendures and net lnding inmeased fm 19.7% of GDP in i990, to20.6% ofrGDP in1991, and _fiher_ to 22% of GDP in 1992 (fiscal year ending September 30). Source: IMF.

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