A QUEST FOR MONETARY AND FINANCIAL REFORMS IN INDONESIA



Mudrajad Kuncoro(1*)

(1) University of Gadjah Mada
(*) Corresponding Author

Abstract


Indonesia in the 1980s provides an unusual and unique example of substantial, albeit gradual, deregulation and rapid development of a domestic financial system. The monetary and financial reforms were part of larger packages of economic reforms designed to stabilize and restructure the economy.

First of all, this paper reviews briefly the framework of financial repression theory. Secondly, It examines the major monetary and financial reforms undertaken by Indonesia during the 1980s. The next section discusses the Indonesian experience in the period financial repression and liberalization. The question may arise: how far the reforms have changed the financial sector. To test whether financial reforms influence the real economy, the last section will investigate the effect of financial liberalization on Inflation and economic growth.

The empirical investigations find that the positive relationship between Inflation and economic growth shows an evidence of short-run Phillips curve in Indonesia. The short-run Phillips curve is typical of a modified Phillips curve with the credit-availability effect added. The study also Indicates that the financial deregulation, triggering a period of positive real interest rates, has statistically affect the economic growth profoundly. Yet, the real deposit rates of interest does not Influence the growth of real GDP significantly.


Keywords


A Quest For Monetary and Financial Reforms in Indonesia, Financial Reforms, Monetary and Financial Reforms

Full Text:

PDF


References

Amdt, H.W. (1981), The Indonesian Economy: Collected Papers, Chopmen Publishers, Singapore. Booth, Anne (ed.), The OH Boom and After: Indonesian Economic Policy and Performance in the Soeharto Era, Oxford University Press, Singapore, 1992. Cole, David C. and Betty F. Slade (1991), Development of Money Markets in Indonesia, Development Discussion Paper No. 371, Harvard Institute for International Development, Harvard University, January. Diaz-Alejandro, Carlos (1985), "Good-bye Financial Repression, Hello Financial Crash", Journal of Development Economics, 19(1-2), pp. 1-24. Djiwandono, J. Soedradjad (1988), "Recent Indonesian Experience in Economic Development", The Indonesian Quarterly, Vol. XVI: 2, pp. 166-189. Engle, R.F. and C.W.J. Granger (1987), "Cointe-gration and Error Correction: Representation, Estimation, and Testing," Econometrica, 55, pp. 251-276. Maxwell J. (1980), "Money, Interest, Inflation and Growth in Turkey", Journal of Monetary Economics, 6(4), October, pp. 535 545. _____(1981), "Inflation and Economic Growth in Pacific Basin Developing Economies", Federal Reserve Bank of San Franscisco Economic Review, fall, pp. 8-18. _____(1982), "Models of Financially Repressed Developing Economies", World Development, 10(9), pp. 731-750. _____(1988), Money, Interest, and Banking in Economic Development, the John Hopkins University Press, Baltimore and London. _____(1989a), "Financial Development Models for and Recent Financial Developments in Developing Countries", Oxford Review of Economic Policy, 5(4), Winter, pp. 13-28. _____(1989b), "Foreign Debt Instability: an Analysis of National Saving and Domestic Investment Responses to Foreign Debt Accumulation in 28 Developing Countries", Journal of International Money and Fi-nance, 8, pp. 315-44. Gelb, Alan H. (1989), "Financial Policies, Growth and Efficiency", World Bank Working Paper, Country Economics Department, no. WPS 202. _____(1989), Forecasting in Business and Economics, 2nd edition, Academic Press Inc, Boston. Granger, C.W.J. and P. Newbold (1974), "Spurious Regressions in Econometrics", Journal of Econometrics, 2(2), pp. 111-120. Hall, Robert E., Jack Johnson, and David M. Lilien (1990), MicroTSP User's Manual Version 7.0, Quantitative Micro Software, California. Insukindro (1990), The Short- and Long-Term Determinants of Money and Bank Credit Markets in Indonesia, University of Essex, Essex, unpublished Ph.D dissertation. International Monetary Fund (1992), /nternational Financial Statistics Yearbook 1992, IMF, Washington DC. Kitchen, Richard L (1986), Finance for the Developing Countries, John Wiley & Sons, Chicester. Kuncoro, Mudrajad (1989), "Dampak Arus Modal Asing Terhadap Pertumbuhan Ekonomi dan Tabungan Domestik", Prisma, 9, pp. 26-47. Granger, C.W.J (1969), "/nuestigafing Causa/ Relations by Econometric Models and Cross-Spectral Methods," Econometrica, 37, pp. 24-36. ______(1986), "Development in the Study of Co-integrated Economic Variables," Oxford Bulletin of Economics and Statistics, 48, pp. 213-228. ______(1991), "Foreign Loans and the Dilemma to Maintain the Momentum of Development", Business News, August 6 & 13 ______(1993a), "Indonesia Menjelang Tahun 2000: Sebuah Renungan", Analisis CSIS, XXII(2), pp. 91-101. ______(1993b), Financial Liberalization in Chile and Indonesia: A Comparative Study, University of Birmingham, Birmingham, (1994), "Structural Adjustment in Indonesia: A Survey of Recent Development", Kelola, IH(5), pp. 84-106. Kunio, Yoshihara (1988), The Rise of Ersatz Capitalism in South-East Asia, Oxford University Press, Singapore. Maclntyre, Andrew J. (1991), "The Politics of Finance in Indonesia: Controls, Confusion and Competition", Mameo Cript, Griffith University, Brisbane, October. McKinnon, Ronald I. (1973), Money and Capital in Economic Development, Brookings Institution, Washington DC. ______(1992), The Order of Economic Liberalization: Financial Control in the Transition to a Market Economy, The John Hopkins University Press, Baltimore and London. Thorbecke Southeast Asian Studies, Singapore. ______(1990), Tinjauan Ekonomi Atas Dampak Paket Deregulasi Tahun 1988 pada Sistem Keuangan Indonesia, PAU-Ekonomi-UI and PT Gramedia, Jakarta. Permono, Iswardono S and Mudrajad Kuncoro (1990), "Kebfjafcsanaan Moneter. Dari 'Financial Repression' Hlngga Bahaya 'Financial Crash'", (Monetary Policy: From Financial Repression to the Danger of Fi-nancial Crash), Jurnal Ekonomi dan Bisnis Indonesia, 2. Rana. Pradumna B., and J. Malcolm Dowling, Jr. (1988), "The Impact of Foreign Capital on Growth: Evidences from Asian Developing Countries", The Developing Economies, 24(1). Robison, Richard (1986), Indonesia: The Rise of Capital, Alien and Unwin, Sydney. Meier, Gerald M. (1989), Leading Issues in Eco- Soekarno (1989), 'Inflasi dan Pertumbuhan nomic Development, 5th edition, Oxford University Press. Nasution, Anwar (1983), Financial Institutions and Policies in Indonesia, Institute of Ekonomi: Analisis Pasca Kurva Phillips Generasi Ketiga', in Sjahrir, et al., Menuju Masyarakat Adil Makmur: 70 Tahun Prof. Sarbini Sumawinata, PT Gramedia, Jakarta




Article Metrics

Abstract views : 186 | views : 100

Refbacks

  • There are currently no refbacks.




Copyright (c) 1994 Journal of Indonesian Economy and Business

Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Journal of Indonesian Economy and Business

Journal

Editorial Team
Focus and Scope
Peer Review Process
Publication Ethics
Screening for Plagiarism

Authors

Author Guidelines
Submission Guidelines
Online Submissions
Copyright Notice
Privacy Statement
Author Fees

Download

Author Pack
Submission Form & Manuscript Template

 

Reviewer

Reviewer Guidelines
Reviewer Acknowledgement

 

Reader

General Search
Achieves
Author index
Title index

 

 

The Journal of Indonesian Economy and Business (print ISSN 2085-8272; online ISSN 2338-5847) is published by the Faculty of Economics and Business Universitas Gadjah Mada, Indonesia. The content of this website is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License

© 2019 Journal of Indonesian Economy and Business 
 Visitor Statistics