Advertisement

‘Big Bang’ versus ‘Go Slow’: Indonesia and Malaysia

Chapter

Abstract

Two recent changes in the management of the Indonesian and Malaysian economies have altered the economic environment in which their central banks operate and the instruments used to control monetary aggregates. First, adjustment programmes adopted in these countries since the early 1980s have moved the management of their economies to a more market-based system. In general, these adjustment programmes have changed each country’s development strategy from a policy of state-led, import-substituting industrialization (ISI) to one of private-sector-led export orientation (EO). Second, both countries have improved the infrastructure of their financial markets by adopting the CAMEL (capital adequacy, asset quality, management, earnings and liquidity) system, under which capital adequacy, asset quality and liquidity are the key variables. On capital ade-quacy, both countries use the risk-based-capital guidelines for all banks as suggested by the Basle Supervisors’ Committee in 1987. The guidelines bring a full range of on- and off-balance-sheet assets into the risk-based system. A harmonized risk-weighting system has been developed to assess the different degrees of risk associated with each category of assets.

Keywords

Interest Rate Monetary Policy Central Bank Banking System Commercial Bank 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

Bibliography

  1. Adams, D.B. and D.H. Henderson (1983) Definition and Measurement of Exchange Market Intervention, Staff Studies 126 (Washington, DC: Board of Governors of the Federal Reserve System) (September).Google Scholar
  2. Aziz, Z.A. (1994) ‘Capital Flows and Monetary Management: the Malaysian Experience’, paper presented at the Eleventh Pacific Basin Central Bank Conference, Hong Kong (31 October-3 November).Google Scholar
  3. Bank Indonesia, Reports for various financial years.Google Scholar
  4. Bank Negara Malaysia (1989) Money and Banking in Malaysia 30th Anniversary Edition, 1959–1989 (Kuala Lumpur).Google Scholar
  5. Bank Negara Malaysia (1995) Annual Report 1994 (Kuala Lumpur) (March 29).Google Scholar
  6. Calvo, G.A. (1994) ‘The Capital Inflows Problem: Concepts and Issues’, Contemporary Economic Policies, 12 (July): 54–6.CrossRefGoogle Scholar
  7. Calvo, G.A., L. Leiderman and C. M. Reinhart (1993) ‘Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors’, IMF Staff Papers, 40 (1): 108–51.CrossRefGoogle Scholar
  8. Chee, S. and R.V. Navaratnam (1992) ‘The Role of Public Sector in Economic Growth’, in The Hoe Yoke and Goh Kim Leng (eds), Malaysia’s Economic Vision: Issues and Challenges (Kuala Lumpur: Pelanduk Publications for the Malaysia Economic Association) ch. 8.Google Scholar
  9. Cole, D.C. (1993) ‘Overview of Four Southeast Asian Countries: Indonesia, Malaysia, Philippines, and Thailand’ paper presented at the Conference on ‘Financial Sector Development in Asia’, Asian Development Bank, Manila, (1–2 September).Google Scholar
  10. Cole, D.C. and B.F. Slade (1992a) ‘Financial Development in Indonesia’, in A. Booth (ed.), The Oil Boom and After: Indonesian Economic Policy and Performance in the Suharto Era (Singapore: Oxford University Press).Google Scholar
  11. Cole, D.C. and B.F. Slaked (1992b) ‘Indonesia Financial Development: A Different Sequencing?’, in D. Vittas (ed.), Financial Regulation-Changing the Rules of the Game (Washington, DC: EDI Development Studies, World Bank).Google Scholar
  12. Cole, D.C., H.S. Scott and P.A. Wellons (eds) (1995) Asian Money Markets (New York: Oxford University Press).Google Scholar
  13. Corbo, V. and J. de Melo (1987) ‘Lessons from the Southern Cone Policy Reforms’, Research Observer 2 (2): 111–42.CrossRefGoogle Scholar
  14. Dewatripont, M. and J. Tirole (1994) The Prudential Regulation of Banks, the Walras-Pareto Lectures at the Ecole des des Hautes Etudes Commerciales, Université de Lausanne (Cambridge, Mass.: MIT Press).Google Scholar
  15. Edwards, S. (1986) ‘The Order of Liberalization the Current Account and Capital Account of the Balance of Payments’, in A. Choksi and D. Papageorgiou (eds), Economic Liberalization in Developing Countries (New York: Basil Blackwell) 185–216.Google Scholar
  16. Edwards, S. (1989) Real Exchange Rates, Devaluation and Adjustment (Cambridge, Mass: MIT Press).Google Scholar
  17. Eichengreen, B., J. Tobin. and C. Wyplosz (1995) ‘Two Cases for the Sand in the Wheels of International Finance’, Economic Journal, 105 (428)(January): 162–72.CrossRefGoogle Scholar
  18. Gertler, M. (1988) ‘Financial Structure and Aggregate Economic Activity: An Overview’, and Comments by Lawrence Weiss, Journal of Money, Credit, and Banking, 20 (3)(August): 559–96.CrossRefGoogle Scholar
  19. Goodhart, C.A.E (1994) ‘What Should Central Banks Do? What Should be Their Macroeconomic Objectives and Operations?’, Economic Journal, 104 (427) (November): 1424–36.CrossRefGoogle Scholar
  20. Hanna, D.P (1993) ‘Indonesian Experience with Financial Sector Reform’, in Y. Akyüz and G. Held (eds), Finance and the Real Economy-Issues and Case Studies in Developing Countries (Santiago de Chile: UNU-WIDER/ECLAC/UNCTAD) 149–200.Google Scholar
  21. IFC (1995) Emerging Stock Markets Factbook 1995 (Washington, DC: International Finance Corporation).Google Scholar
  22. IMF (1995) ‘International Capital Markets: Developments, Prospects, and Policy Issues’, World Economic and Financial Surveys (Washington, DC: International Monetary Fund) (August).Google Scholar
  23. Jomo, K.S. (ed.) (1995) Privatizing Malaysia: Rents, Rhetoric, Realities (Boulder, Colorado: Westview).Google Scholar
  24. Kassim, Mohammad Sheriff (1991) ‘Privatisation: Performance, Problem, and Present’, in Lee Kiong Hock and Shyamala Nagaraj (eds), The Malaysian Economy beyond 1990: International and Domestic Perspectives (Kuala Lumpur: Persatuan Ekonomi Malaysia) 183–96.Google Scholar
  25. Khan, M.S. and C.M. Reinhart (eds) (1995) Capital Flows in the APEC Region (Washington, DC: International Monetary Fund).Google Scholar
  26. Kharas, H. (1991) ‘Malaysian Saving in the 1990s: Problems and Prospects’, in Lee Kiong Hock and Shyamala Nagaraj (eds), The Malaysian Economy Beyond 1990: International and Domestic Perspectives (Kuala Lumpur: Persatuan Ekonomi Malaysia) 251–71.Google Scholar
  27. McKinnon, R.I. (1991) The Order of Economic Liberalization: Financial Control in the Transition to a Market Economy (Baltimore: Johns Hopkins University Press).Google Scholar
  28. MacDonald, R. and M.P. Taylor (1992) ‘Exchange Rate Economics: A Survey’, IMF Staff Papers, 39 (1) (March): 1–57.CrossRefGoogle Scholar
  29. MacDonald, R. and M.P. Taylor (1994) ‘Re-examining the Monetary Approach to the Exchange Rate: the Dollar-Franc, 1976–90’, Applied Financial Economics, 4: 423–9.CrossRefGoogle Scholar
  30. Merican, M. (1992) ‘The Employees Provident Funds’, in Ten Hoe Yoke and GohGoogle Scholar
  31. Kim Lang (eds), Malaysia’s Economic Vision: Issues and Challenge ch. 4.Google Scholar
  32. Nasution, A. (1983) Financial Institutions and Policies in Indonesia (Singapore: ISEAS).Google Scholar
  33. Nasution, A. (1994) ‘An Evaluation of the Banking Sector Reforms in Indonesia, 1983–1993’, Asia-Pacific Development Journal 1(1): 63–89.Google Scholar
  34. Nasution. A. (1995a) ‘The Banking Sector Reforms in Indonesia: Their Rationale, Aspects and Impacts’, research report submitted to Professor Akira Kohsaka of the Osaka School of International Public Policy, Osaka University (unpublished).Google Scholar
  35. Nasution, A. (1995b), A. (1995b) ‘Market Mechanism and Government: The Case of Indonesia Following the Economic Reforms Since the 1980s’, paper presented at the Conference on the ‘World Economy in Transition’, organised by the Institute of Economic Research, Hitotsubashi University, Tokyo (8–10 February 1996).Google Scholar
  36. Nasution, A. (1995c) ‘Financial Sector Policies in Indonesia, 1980–1993’, in S.N. Zahid (ed.), Financial Sector Development in Asia (Manila: Asian Development Bank) ch. 3.Google Scholar
  37. Obstfeld, M. (1995) ‘International Currency Experience: New Lessons and Lessons Relearned’, Brookings Papers on Economic Activity, (Washington, DC: Brookings Institution) 1: 119–96.CrossRefGoogle Scholar
  38. Poole, W. (1971) ‘Optimal Choice of Monetary Policy Instruments in a Simple Stochastic Macro Model: Rejoinder’, Quarterly Journal of Economics, 85 (4) (May): 716–7.CrossRefGoogle Scholar
  39. Portes, R. and A.K. Swoboda (eds) (1987) Threats to International Financial Stability (Cambridge University Press).Google Scholar
  40. Rodriguez, C.A. (1993) ‘Money and Credit Under Currency Substitution’, IMF Staff Papers, 40 (2) (June): 415–26.Google Scholar
  41. Scott, D.H. (1994) ‘The Regulation and Supervision of Domestic Financial Conglomerates’, Policy Research Working Paper, 1329 (Washington, DC: World Bank, Financial Sector Development Department) (August).Google Scholar
  42. Sheng, A. (ed.) (1996) Bank Restructuring. Lessons from the 1980s (Washington, DC: World Bank).Google Scholar
  43. Stiglitz, J.E. and A. Weiss (1981) ‘Credit Rationing in Markets with Imperfect Information’, American Economic Review, 71 (June): 393–410.Google Scholar
  44. Stiglitz, J.E. (1994) ‘The Role of States in Financial Markets’, in Bruno, M. and B. Pleskovic (eds), Proceedings of the World Bank Annual Conference on Development Economics, 1993 (Washington, DC: The World Bank) (May): 19–52.Google Scholar
  45. Taguchi, H. (1995) ‘Policy Assignment on Money Supply: the Case of Indonesia in the 1980s’, ASEAN Economic Bulletin, 12(1) (July): 64–79.CrossRefGoogle Scholar
  46. Tobin, J. (1987) ‘A Proposal for International Monetary Reform’, Eastern Economic Journal, 3 (July/October).Google Scholar
  47. Tobin, J. (1989) ‘A Proposal for International Monetary Reform’, Eastern Economic Journal, 4 (July): 153–9.Google Scholar
  48. White, L.J. (1995) ‘The Financial Sector and Asian Development: Historical Experiences and Prospects’, special chapter in Asian Development Bank, Asian Development Outlook 1995 and 1996 (Hong Kong: Oxford University Press).Google Scholar
  49. Yan, L.S. (1991) ‘Malaysia: Issues in Capital Market Development’, in Lee Kiong Hock and Shyamala Nagaraj (eds), The Malaysian Economy Beyond 1990: International and Domestic Perspectives (Kuala Lumpur: Persatuan Ekonomi Malaysia) 272–98.Google Scholar
  50. Yan, L.S. (1992) ‘The Savings-Investment Gap, Financing Needs, and Capital Market Development’, Ten Hoe Yoke and Goh Kim Leng (eds), Malaysia’s Economic Vision: Issues and Challenges (Kuala Lumpur: Pelanduk Publications for the Malaysia Economic Association).Google Scholar
  51. Yan, L.S. and C.T. Fan (1995) ‘Money Market in Malaysia’, in D.C. Cole et al. (eds), Asian Money Markets (New York: Oxford University Press).Google Scholar
  52. Yusof, Z.A. (1991) ‘Distributional Policies and Programmes: The Malaysian Experience’, in Lee Kiong Hock and Shayamala Nagaray (eds), The Malaysian Economy Beyond 1990: International and Domestic Perspectives (Kuala Lumpur: Persatuan Ekonomi Malaysia) 343–79.Google Scholar
  53. Yusof, Z.A. (1992) ‘Financial Services: The Role and Tasks Ahead’, in Ten Hoe Yoke and Goh Kim Leng (eds), Malaysia’s Economic Vision: Issues and Challenges, (Kuala Lumpur: Pelanduk Publications for the Malaysia Economic Association) ch. 7.Google Scholar

Copyright information

© International Development Research Centre 1998

Authors and Affiliations

There are no affiliations available

Personalised recommendations