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Investor reaction to IMF actions in the indonesian financial crisis

  • Ali Kutan
  • Brasukra Sudjana

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.

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Article provided by Taylor & Francis Journals in its journal Journal of Economic Policy Reform.

Volume (Year): 6 (2003)
Issue (Month): 3 ()
Pages: 181-190

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Handle: RePEc:taf:jpolrf:v:6:y:2003:i:3:p:181-190
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  1. Hal Hill, 2000. "Indonesia: The Strange and Sudden Death of a Tiger Economy," Oxford Development Studies, Taylor & Francis Journals, vol. 28(2), pages 117-139.
  2. Graciela L. Kaminsky & Sergio L. Schmukler, 1999. "What triggers market jitters: a chronicle of the Asian crisis," International Finance Discussion Papers 634, Board of Governors of the Federal Reserve System (U.S.).
  3. Bernd Hayo & Doh Chull Shin, 2002. "Popular Reaction to the Intervention by the IMF in the Korean Economic Crisis," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 5(2), pages 89-100.
  4. Bollerslev, Tim & Chou, Ray Y. & Kroner, Kenneth F., 1992. "ARCH modeling in finance : A review of the theory and empirical evidence," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 5-59.
  5. Andrew Berg, 1999. "The Asia Crisis; Causes, Policy Responses and Outcomes," IMF Working Papers 99/138, International Monetary Fund.
  6. Jeffrey D. Sachs, 1999. "Creditor Panics: Causes and Remedies," Cato Journal, Cato Journal, Cato Institute, vol. 18(3), pages 377-390, Winter.
  7. Kho, Bong-Chan & Stulz, Rene M., 2000. "Banks, the IMF, and the Asian crisis," Pacific-Basin Finance Journal, Elsevier, vol. 8(2), pages 177-216, May.
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