Indonesian Macro Policy Through Two Crises

41 Pages Posted: 27 May 2015 Last revised: 3 Jun 2016

See all articles by Prayudhi Azwar

Prayudhi Azwar

The University of Western Australia - UWA Business School; Bank Indonesia

Rod Tyers

Australian National University (ANU) - School of Economics; The University of Western Australia - Department of Economics

Date Written: May 1, 2015

Abstract

Indonesia fielded shocks due to the Asian financial crisis (AFC) and the global financial crisis (GFC) quite differently. Financial contagion, policy misdirection, panic and political upheaval saw the AFC bring economic collapse. The decade-later GFC, however, brought real growth of 6.1% (2008) and 4.5% (2009), amongst the world’s best performances at the time. This paper reviews these events and employs numerical modelling of stylized AFC and GFC shocks to show that some of the contrast stems from differences in the shocks and intervening changes in economic structure. Critically, IMF conditionality during the AFC required unsustainably contractionary reforms. Capital flight elements were present in both crises, however, and exchange rate depreciations and money-financed fiscal expansions are shown to have contributed significantly to resolution.

Keywords: Indonesia, External shocks, Financial crises, Exchange rates Macroeconomic policy

JEL Classification: E32, E44, E43, E58, F43, F47, N25

Suggested Citation

Azwar, Prayudhi and Tyers, Rod, Indonesian Macro Policy Through Two Crises (May 1, 2015). CAMA Working Paper No. 16/2015, Available at SSRN: https://ssrn.com/abstract=2610963 or http://dx.doi.org/10.2139/ssrn.2610963

Prayudhi Azwar

The University of Western Australia - UWA Business School ( email )

Crawley, Western Australia 6009
Australia

Bank Indonesia ( email )

JL. M.H. Thamrin No. 2
Jakarta, 10350
Indonesia

HOME PAGE: http://www.bi.go.id

Rod Tyers (Contact Author)

Australian National University (ANU) - School of Economics ( email )

Arndt Building
Australian National University
Canberra, Australian Capital Territory 0200
Australia
61-6-249-5124 (Fax)

The University of Western Australia - Department of Economics ( email )

35 Stirling Highway
Crawley, Western Australia 6009
Australia
61 8 6488 5632 (Phone)

HOME PAGE: http://www.business.uwa.edu.au/school/staff-profiles?type=profile&dn=cn%3DRodney%20Tyers%2Cou%3DEcon

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
147
Abstract Views
990
rank
215,335
PlumX Metrics