In 1995, the Thai baht is pegged to a basket of currencies. Assume that the baht exchange rate is set at 25 baht per U.S. dollar. Thailand is experiencing rapid economic growth, with extensive ongoing foreign investment. Consumer price index (CPI) inflation in Thailand is somewhat higher than in the United States, and the current account in Thailand is in deficit. Nevertheless, Thailand has no problem maintaining its fixed exchange rate with the dollar. However, two years later, prospects for economic growth are much lower and investors are worried about the political and financial uncertainties in Thailand . Which statement(s) is/are right?
A.
In 1995, Thai baht would soon depreciate as suggested by purchasing power parity (PPP)
B.
Thai baht would appreciates strongly against the U.S. dollar two years later.
C.
As suggested by the asset market approach, Thai's growth potential attracts large inflows of capital through foreign investment in the country.
D.
In 1995, productivity gains in Thailand allow it to sustain a real appreciation of the baht.
E.
The spot exchange rate would adjust to inflation differential between the two countries two years later.