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The ill-fated currency board proposal for Indonesia

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  • Ross H. McLeod

Abstract

In February 1998, President Soeharto’s chief economic advisor, Professor Steve Hanke, proposed a currency board as the means to extract Indonesia from the Asian Financial Crisis. President Soeharto embraced Hanke’s proposal and announced that he intended to implement it. The international, and eventually domestic, opposition was so vociferous that the currency board plan was aborted. Professor Ross McLeod’s diagnosis of the state of Indonesia’s economy concludes that most analysts failed to understand Indonesia’s economic fundamentals; that the opposition to the currency board was ill-informed; that Soeharto’s embrace of the currency board was sensible; and that the opposition to the currency board was motivated to a considerable extent by the desire to use the financial crisis to force a regime change in Indonesia.
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Suggested Citation

  • Ross H. McLeod, 2014. "The ill-fated currency board proposal for Indonesia," Departmental Working Papers 2014-02, The Australian National University, Arndt-Corden Department of Economics.
    • Handle: RePEc:pas:papers:2014-02
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    File URL: https://crawford.anu.edu.au/acde/publications/publish/papers/wp2014/wp_econ_2014_02.pdf
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    References listed on IDEAS

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    1. David Cole & Betty Slade, 1998. "Why Has Indonesia's Financial Crisis Been so Bad?," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 34(2), pages 61-66.
    2. J. Soedradjad Djiwandono, 2004. "Liquidity support to banks during Indonesia's financial crisis," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 40(1), pages 59-75.
    3. J. Thomas Lindblad, 1997. "Survey of Recent Developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 33(3), pages 3-33.
    4. Colin Johnson, 1998. "Survey of Recent Developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 34(2), pages 3-59.
    5. George Fane & Ross H.McLeod, 2002. "Banking Collapse and Restructuring in Indonesia, 1997-2001," Cato Journal, Cato Journal, Cato Institute, vol. 22(2), pages 277-295, Fall.
    6. Steve Hanke, 2002. "On dollarization and currency boards: Error and deception," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 5(4), pages 203-222.
    7. Ross H. McLeod, 1998. "From Crisis to Cataclysm? The Mismanagement of Indonesia’s Economic Ailments," The World Economy, Wiley Blackwell, vol. 21(7), pages 913-930, September.
    8. Walter B. Wriston, 1998. "Dumb Networks and Smart Capital," Cato Journal, Cato Journal, Cato Institute, vol. 17(3), Winter.
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    Cited by:

    1. Gupta, Krisna & Gretton, Paul & Patunru, Arianto, 2022. "Projecting the long run impact of an economic reform: the case of the Indonesian Omnibus Law and concurrent changes in trade policy," Conference papers 333472, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

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