ABSTRACT

This chapter considers several potential mechanisms, placing emphasis on the role of wealth. It outlines our principal research findings about the ability of Indonesian households to mitigate the impact of the crisis on their welfare during the first year of the economic crisis. The chapter describes some of the mechanisms that may be important in the Indonesian context. It examines the immediate effects of the Asian crisis on the well-being of Indonesians using the Indonesia Family Life Survey, an on-going longitudinal household survey. The chapter highlights some of the key smoothing mechanisms that appear to have been adopted by Indonesian households. Prior to assessing the extent to which Indonesian households were able to smooth the effects of the economic shocks associated with the crisis, it is useful to construct a measure of the size of the shock faced by different households which is independent of their own smoothing behavior.