Despite external shocks, Indonesia has maintained creditworthiness through swift adjustment. Indonesia's flexible economic management and clear policy signals have lent stability to the economy, in contrast to the stop and go reforms, uncertainty, and constant debt renegotiations in many high...

After discussing the analyties open-economy adjustment, the authors examine the implications of the open capital account for Indonesia's adjustment, present the empirical estimates of a macroeconomic model and use the model to illustrate the nature of external adjustment necessary to ensure the...