chapter  4
The muddling through of crisis management in Indonesia: a case for central bank independence
Pages 9

The Indonesian crisis developed as a sequence of events, starting with an external shock as part of the contagious financial panic in the region that hit Jakarta's financial market in mid July 1997. The policy responses and market reactions that followed exposed the fragility of the national banking system. In the process a banking crisis developed. It seeped through the payment system, revealing structural weaknesses in the national economy, which was embedded with corruption and crony capitalism. The economy could not withstand the financial crisis and very soon an economic crisis developed. Before long the economic crisis had exposed institutional weaknesses in Indonesia's social and political system. Ultimately the Indonesian crisis involved practically all aspects of people's lives.