Economic Turbulence and the Indonesian Economy

Penulis: Bambang Brodjonegoro dan Yoopi Abimanyu

Indonesia has had an open economy since the early 1970s when the government liberalized capital controls amid stable inflation and modest fiscal deficits (Hill 1996). Meanwhile, open domestic economies are susceptible to external shocks such as large short-term capital movements. As a result, we might expect that Indonesia’s liberal markets would make the economy more vulnerable to international shocks than its less-open neighbors such as the People’s Republic of China (PRC). Yet, we will show that during the most recent crisis emanating from the Eurozone, Indonesia’s domestic economy was not destabilized. This policy brief will explore the reasons behind this result.

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ADB Policy Paper latest - Economic Turbulence and the Indonesian Economy No 12 April 2014 (424Kb)