Causes of the Crisis

  • Hal Hill


We come now to the major puzzle of the episode: why did it happen? This broad question immediately points to a number of specific questions:
  • Why was the crisis so severe (and not, for example, a relatively mild correction)?

  • Were the crisis economies, Indonesia in particular, ‘accidents waiting to happen’?

  • Why was it so unexpected, by markets, international agencies, and academic specialists?

  • Why was Indonesia so much worse than the other countries?

  • How should blame be apportioned among external and domestic factors, and among technical economic/financial factors and broader political and social variables?

The major argument in this section is that it was the conjunction of many factors which caused the crisis: political, social and economic; longer term and structural, and immediate and short-term; and domestic and international. It is also necessary — though empirically not easy — to distinguish between the factors leading up to the crisis, and the government’s management of it.


Exchange Rate Monetary Policy Mobile Capital External Debt Capital Account 
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Copyright information

© Institute of Southeast Asian Studies, Singapore 1999

Authors and Affiliations

  • Hal Hill

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