Investor reaction to IMF actions in the indonesian financial crisis

Ali Kutan and Brasukra Sudjana

Journal of Economic Policy Reform, 2003, vol. 6, issue 3, 181-190

Abstract: Many observers have criticized recent IMF actions and program announcements during the Asian crisis by arguing that the IMF's declaration that Asia needed drastic reforms with respect to institutional issues such as transparency, corporate governance and corruption has led investors to panic and withdraw from the region. We examine the reaction of investors in the Indonesian stock market to IMF news. Evidence indicates that IMF actions and program announcements are associated with a decline in market uncertainty. Hence, our finding does not appear to support the panic view. Policy implications of the findings are also discussed.

Date: 2003
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DOI: 10.1080/1384128032000175780

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