ABSTRACT
Recent Indonesian monetary policy experience can be classified under two distinct financial regimes characterised by contrasting monetary objectives and use of different policy instruments. The first regime (1974-82) of direct credit control and extensive central bank intervention in credit allocation was associated with rapid real economic growth led by oil, gas and timber export expansion, but slow growth of the financial system. The more recent period of financial decontrol (1983—90), in which development of market-based instruments of monetary policy occurred, was paralleled by a decline in oil and gas export prices and earnings and a reorientation of production toward other exports, including labour-intensive and resource-based manufactures. Real economic growth remained high on average (5.5 per cent p.a. 1984-9), while the financial system expanded dramatically.
