Indonesian Monetary Policy During the 1997-98 Crisis: A Monetarist Perspective

George Fane

Bulletin of Indonesian Economic Studies, 2000, vol. 36, issue 3, 49-64

Abstract: This paper defends the IMF's strategy of targeting base money (M0) in 1997-98 against the criticism by Grenville (2000) that it was destined to fail because M0 is mainly demand determined and the demand for it was increased by a large and unpredictable amount by the banking panic. Grenville contends that Indonesian monetary policy should have aimed at domestic price stability. It is argued here that the growth of M0 far exceeded what could be justified by last resort lending to accommodate the banking panic, and that rapid inflation could only have been avoided by preventing most of the expansion of the public's cash holding that actually occurred. Achieving a modest target for domestic inflation would not therefore have been very different in practice from setting tight limits on the growth of M0. In contrast, both these policies would have been very different from the loss of control over M0 that actually occurred.

Date: 2000
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/00074910012331338953 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:bindes:v:36:y:2000:i:3:p:49-64

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/CBIE20

DOI: 10.1080/00074910012331338953

Access Statistics for this article

Bulletin of Indonesian Economic Studies is currently edited by Firman Witoelar Kartaadipoetra, Arianto Patunru, Robert Sparrow, Sarah Xue Dong and Sean Muir

More articles in Bulletin of Indonesian Economic Studies from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().