The process of decentralization in Indonesia was initiated after a long period of autocratic rule. Despite the political imperatives, there is a need to carefully sequence the fiscal decentralization to ensure that financing follows the assignment of functions. The functions should be...

A reliable inflation-forecasting model is central for a sound monetary policy framework. In this paper, we study the domestic and international transmission effects on inflation in Indonesia and analyze the possible leading indicators of inflation. We identify the exchange rate, foreign...

Intergovernmental equalization grants have been described as “the glue that holds a nation together.” Getting the grants system right is critical to countries as they decentralize. This paper illustrates general principles with an example based on Indonesia in 2000. A general grant should be...

This is the fifth of a series of papers that are being written as part of a larger project to estimate a small quarterly Global Projection Model (GPM). The GPM project is designed to improve the toolkit to which economists have access for studying both own-country and cross-country linkages. In...

The paper reviews the progress being made toward Indonesia's full emergence from the crisis. Banking sector restructuring has been at the heart of the reform program. Corporate debt restructuring is critical for resumption of normal credit flows and Indonesia's full and sustainable economic...

The impact of higher petroleum prices on the aggregate price level, real growth, and income distribution is appraised within a multisector computable general equilibrium (CGE) model. A reduction in the government subsidy raises petroleum prices and production costs throughout the economy....

This paper investigates the extent to which output has recovered from the Asian crisis. A regime-switching approach that introduces two state variables is used to decompose recessions in a set of six Asian countries into permanent and transitory components. While growth recovered fairly quickly...

This paper assesses the effect of constrained trade finance on trade flows in countries undergoing financial and balance of payments crises. Most of the countries that had a major crisis had a significant trade contraction, while trade-related finance declined sharply. However, trade may also be...

Indonesia’s growth in 2009 was four and a half percent, the third highest in the G-20 group of countries; and the pace is accelerating in 2010. Both push and pull factors have attracted large portfolio inflows, particularly into government bonds and Short-term Bank Indonesia certificates...

Indonesia has improved fiscal transparency; tax legislation has been substantially revised; tax administration is improving; legal and administrative measures have been adopted to improve public sector governance; and important steps have been taken to rationalize government banking arrangements....