Question

With so many foreigners living in Thailand, a number of them western and non-western, work in the Kingdom without proper approval; work permits. As they are paid cash for their illegal work, how do you think this affects the Thai economy, money supply, and capital available for loan.

Answer 1

If more people are paid in cash which means that they cannot show these transaction to state government or deposit that money in their bank account. Government wants to make a transparent economy such that they know the amount cash flowing in the economy which makes it easier for Central Bank to implement the policy.

Money supply rises if these people can deposit that money in the bank account which can be further lend to other person which is not possible here, so we can say that money supply would remain constant or fall. Let me explain it more: If a person work on cash and also on regular whose salary is credited in account. She will spend money first which she received from cash job and keep rest of the money in account. Keeping money in account reduce cash flow in economy and tends to reduce money supply for a short period of time.

As people cannot deposit money received in cash, capital available for loan decreases with banks.