The East Asian Crisis : An Analysis of Remedies Applied to Malaysia and Indonesia

Marion Pircher


Development in Malaysia and Indonesia was similar until 1997, when the financial crisis hit many countries in the region. But after Malaysia introduced controls on capital outflows and a fixed exchange rate regime („unorthodox‟ policies), with Indonesia following the advice of the IMF („orthodox‟ policies) the countries experienced different development paths. In this paper the remedies employed by the two countries were compared. A „difference-in-difference‟ technique and a ratio analysis were used. The comparison shows that Malaysia recovered faster with lower costs for the economy, while Indonesia began its recovery only in 2002 with a huge burden for the future.


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