Macroeconomic policies, crises, and long-term growth in Indonesia, 1965-90

Abstract

This book attempts to explain why Indonesia's economic performance during the period far surpassed that of countries endowed with similar assets and subject to the same shocks. It emphasizes the role of macroeconomic policies in influencing economic growth and transformation - especially the resilience of the Indonesian economy to the external shocks of the 1980s. While this study is primarily an assessment of macroeconomic management, it also assesses trade and financial policies because of their importance in shaping the response of the economy to macroeconomic policies and to nonpolicy disturbances. It discusses the characteristics of the country, the organization of the economy, and the workings of key markets. It provides a brief history of Indonesia up to the tumultuous events of 1965 that led to significant and long-lasting changes in economic philosophy. The study reviews macroeconomic developments in the 1965-90 period, and explains the political constraints on economic policymaking arising from the strength of key interest groups. Macroeconomic and exchange rate management are analyzed and the Indonesian experience with macroeconomic management is summarized.