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Indonesia; Anatomy of a Banking Crisis Two Years of Living Dangerously 1997–99

Author

Listed:
  • Arto Kovanen
  • Olivier M Frecaut
  • Barbara E Baldwin
  • Charles Enoch

Abstract

This study looks at the first two years of the banking crisis that erupted in Indonesia in late 1997. It finds that the banking sector was weak at the outset, and that governance problems intensified the crisis and seriously delayed its resolution. Although a strategy was put in place over the initial months, protracted delays in implementation led to an explosion in the costs of resolution. By end-1999, the critical elements to reconstruct the banking system were in place, and the political transition seemed completed; but, in a continuing unsettled environment, the new authorities still faced daunting challenges. This study looks at the first two years of the banking crisis that erupted in Indonesia in late 1997. It finds that the banking sector was weak at the outset, and that governance problems intensified the crisis and seriously delayed its resolution. Although a strategy was put in place over the initial months, protracted delays in implementation led to an explosion in the costs of resolution. By end-1999, the critical elements to reconstruct the banking system were in place, and the political transition seemed completed; but, in a continuing unsettled environment, the new authorities still faced daunting challenges. This study looks at the first two years of the banking crisis that erupted in Indonesia in late 1997. It finds that the banking sector was weak at the outset, and that governance problems intensified the crisis and seriously delayed its resolution. Although a strategy was put in place over the initial months, protracted delays in implementation led to an explosion in the costs of resolution. By end-1999, the critical elements to reconstruct the banking system were in place, and the political transition seemed completed; but, in a continuing unsettled environment, the new authorities still faced daunting challenges.

Suggested Citation

  • Arto Kovanen & Olivier M Frecaut & Barbara E Baldwin & Charles Enoch, 2001. "Indonesia; Anatomy of a Banking Crisis Two Years of Living Dangerously 1997–99," IMF Working Papers 01/52, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:01/52
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    Cited by:

    1. Tchana Tchana, Fulbert, 2014. "The empirics of banking regulation," Emerging Markets Review, Elsevier, vol. 19(C), pages 49-76.
    2. Ross H. McLeod, 2002. "Second and Third Thoughts on Privatisation in Indonesia," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 9(2), pages 151-164.
    3. Uma Ramakrishnan & Athanasios Vamvakidis, 2002. "Forecasting Inflation in Indonesia," IMF Working Papers 02/111, International Monetary Fund.

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