Pholphirul, Piriya2012-03-302012-03-302009ASEAN Economic Bulletin02174472https://hdl.handle.net/10986/4840This paper uses national income identity to explain the causal relationships among Thailand's aggregate volatility, deficient financial structure, financial liberalization, and financial crisis in this country. Relatively good macroeconomic policies and diversified structure were able to compensate for financial imperfections and weak corporate governance in the financial sector in the period 1970-90. Under these conditions, real GDP growth was positive, inflation was relatively low, and consumption was relatively less volatile than GDP. The 1997 crisis, however, severely affected the ability of central authorities to smooth fluctuation. Investment and consumption volatility increased substantially. This implies that, when counter-cyclical policies are difficult to implement and incomplete markets exist, it is much more difficult to stabilize consumption.ENMacroeconomics: Production E230Business FluctuationsCycles E320Financial Markets and the Macroeconomy E440MergersAcquisitionsRestructuringVotingProxy ContestsCorporate Governance G340Macroeconomic Analyses of Economic Development O110Economic Development: Financial MarketsSaving and Capital InvestmentCorporate Finance and Governance O160Fiscal and Monetary Policy in Development O230Journal ArticleWorld Bank