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Interest Rate Policy And Its Implication On The Banking Restructuring Programs In Indonesia During The 1997-Financial Crisis: An Empirical Investigation

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  • Siregar, Reza Y.

    ()
    (School of Economics, University of Adelaide)

Abstract

Despite a number of changes in the leaderships of the Indonesian Bank Restructuring Agency (IBRA) and in the policy approaches adopted by the country to restructure the banking sector, the progress has been less than impressive. This study shows that that the selection of policy measures adopted by the monetary authorities during the post-1997 financial crisis, has adversely affected the performance of the restructured banks. In particular, the high domestic interest rate policy adopted to stabilize the local currency and to keep a tight growth of base money has not been an effective one. Instead, this policy has arguably raised the cost of bank restructuring in the country.

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Bibliographic Info

Paper provided by The European Institute of Japanese Studies in its series EIJS Working Paper Series with number 154.

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Length: 28 pages
Date of creation: 01 Sep 2002
Date of revision:
Handle: RePEc:hhs:eijswp:0154

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Keywords: Financial Crisis; Bank Restructuring; Interest Rate;

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References

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  1. Leonardo Hernández & Peter Montiel, 2002. "Post-crisis exchange rate policy in five Asian countries: filling in the 'hollow middle'?," Proceedings, Federal Reserve Bank of San Francisco, issue Sep.
  2. Hadi Soesastro & M. Chatib Basri, 1998. "Survey of Recent Developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 34(1), pages 3-54.
  3. Corsetti, G. & Pesenti, P. & Roubini, N., 1998. "What Caused the Asian Currency and Financial Crisis?," Papers 343, Banca Italia - Servizio di Studi.
  4. Ross McLeod, 2000. "Survey of Recent Developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 36(2), pages 5-41.
  5. Mari Pangestu & Manggi Habir, 2002. "The Boom, Bust and Restructuring of Indonesian Banks," IMF Working Papers 02/66, International Monetary Fund.
  6. Colin Johnson, 1998. "Survey of Recent Developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 34(2), pages 3-59.
  7. Steven Radelet & Jeffrey D. Sachs, 1998. "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 1-90.
  8. Jason Furman & Joseph E. Stiglitz, 1998. "Economic Crises: Evidence and Insights from East Asia," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 1-136.
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Citations

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Cited by:
  1. Reza Siregar, 2011. "Macro-Prudential Approaches to Banking Regulation : Perspectives of Selected Asian Central Banks," Finance Working Papers 23211, East Asian Bureau of Economic Research.
  2. Siregar, Reza & Wihardja, Monica, 2013. "Fragile Balance of Payment in Indonesia in the Midst of Recent Global Economic Uncertainties," MPRA Paper 49027, University Library of Munich, Germany.

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