ABSTRACT
The International Monetary Fund (IMF) approach gives the appearance of being premised on the view that poor microeconomic policies were a significant contributor to the crisis, and therefore that microeconomic reform is capable of ending it. Notwithstanding Indonesia's exemplary record of macroeconomic management and performance, concerns had been voiced frequently prior to the crisis about a range of microeconomic issues. In normal circumstances the usefulness of Keynesian macroeconomic management concepts in Indonesia is limited. The most fundamental Keynesian concept is that, in circumstances in which aggregate demand is low for some reason, the government can offset this by manipulating its fiscal and monetary policies. Fiscal and monetary policy had been conservatively managed, inflation was moderate and declining, and international reserves were increasing rapidly. The key to recovery and future success, therefore, is to pursue further liberalisation, not to wind back that which has already been achieved.
