This paper investigates the effects of real exchange rate depreciation and supply side shocks on exports and imports. Indonesia provides an interesting case study of the subject because this country experienced a large depreciation, banking sector collapse, and socio-political turbulence during...

This paper aims to assess the effects of aid on fiscal behavior in Indonesia. There are four main findings. First, aid inflow is primarily driven by the need to fill the fiscal gap. That is, aid is demand driven. Second, although project aid is by definition intended for development...

With the improvement of relationship with the western countries after the demise of the old order regime of President Soekarno, Indonesia received a large volume of foreign aid that played a crucial role in the recovery of the economy. Indonesia remained a significant recipient of foreign aid...

One of the more important concepts in open macroeconomics is the “equilibrium real exchange rate” (ERER). Real exchange rate misalignments are argued to have been the cause of loss of competitiveness and growth slowdowns and eventual currency crises (in the event of sustained...

While favoring relatively more flexible regimes, emerging economies in East Asia and elsewhere appear to heavily manage their currencies despite being officially described as “floaters”. In other words, revealed preferences of regional monetary authorities appear to indicate a high...

The first part of this paper examines the behaviour of rupiah over the last seven years (1996 - 2002) to ascertain whether in fact there is specific evidence of a return to de facto US dollar peg in Indonesia. To preview the main conclusion, we find evidence to suggest that this has been the...

China is the largest reserve holder among developing countries, having amassed over US$ 600 billion of reserves by end 2004. Given the potential liquidity overhang concerns in China due to the rapid reserve buildup, the PeopleÂ’s Bank of China (PBOC) has actively attempted to sterilize these...

Regional integration has become commonplace in the world economy. Moreover, there is clear evidence of a ‘trade first’ approach to regionalism. What is the logic behind this approach? Is it that trade integration prepares the ground for monetary integration by helping to fulfil optimum...

The first part of this paper examines the behaviour of rupiah over the last eight years (1995 - 2003) to ascertain whether in fact there is specific evidence of a return to de facto US dollar peg in Indonesia. While we fail to find strong evidence to suggest Indonesia has reverted to the extent...