Is Currency Depreciation or More Government Debt Expansionary? The Case of Thailand

Applying the aggregate demand and aggregate supply (AD/AS) model and based on a quarterly sample during 2001.Q1 -2016.Q3, this paper finds that real GDP in Thailand has a positive relationship with the real effective exchange rate, government debt as a percent of GDP, labor productivity, the real oil price and a negative relationship with the real interest rate, real labor cost and the expected inflation rate. Hence, real appreciation of the Thai baht and sustainable increase in government debt as a percent of GDP would raise aggregate output.