Indonesian macro policy through two crises

Prayudhi Azwar, Rod Tyers

Research output: Contribution to journalArticle


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 GFC, however, brought about real domestic growth of 6.1 per cent (2008) and 4.5 per cent (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 Indonesia's economic structure. Critically, IMF conditionality during the AFC required unsustainably contractionary reforms. Capital fight elements were present in both crises, however, and exchange rate depreciations and money-financed fiscal expansions are shown to have contributed significantly to resolution.

Original languageEnglish
Pages (from-to)101-134
Number of pages34
JournalJournal of Southeast Asian Economies
Issue number2
Publication statusPublished - Aug 2020

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