Endnotes

¹I wish to thank Masahiro Kawai, Mario Lamberte, and Thanong Bidaya for their constructive comments during my stay at the Asian Development Bank Institute (September–December 2007). For the case study on Thailand, I am grateful for the stimulating discussions with colleagues at the Fiscal Policy Research Institute of Thailand’s Ministry of Finance, particularly Kanit Sangsubhan and Olarn Chaipravat, during summer 2007, and for the frequent exchange of views on the Thai model with Chanin Manopiniwes of the World Bank office in Bangkok. For the Indonesian case study, I would like to acknowledge the constructive comments and discussions with researchers and policymakers at the Indonesian central bank during the period of my consulting work with Bank Indonesia (2003–2007). Any errors and responsibility for the views expressed in the report are mine.

²This is in addition to the issue of sectoral composition

³The slopes in other Asian countries also confirm the theory prediction (due to space constraint, the results are not reported here).

⁴By now it has been widely recognized that the Asian financial crisis was not a standard current account crisis. There was little evidence of substantial overvaluation of exchange rates (only about 5–8% stronger than their 1990–1996 average), and there was a dramatic swing of the current account, i.e., from deficit to surplus. For example, in Thailand, the current account swung from a deficit of 8% of GDP in 1996 to a surplus of 12% in 1998. This startling adjustment was accomplished entirely by a compression of imports, as they plunged by 40%.

⁵Not constrained by the IMF agreements, Malaysia’s fiscal deficit was fairly large, reaching close to 6% of GDP during 2000–2003. The deficit remained larger than 2% in 2006, validating the country’s stand in adopting the necessary counter-cyclical fiscal policy. Even Korea’s fiscal deficit during and immediately after the crisis was larger than in Indonesia. However, the Korea’s V-shaped recovery subsequently allowed the Korean government to reverse the trend by achieving a fiscal surplus in 2000-2002.

⁶One of the most common measures is the Foster-Greer-Thorbecke (FGT), which is capable of measuring: (1) headcount, i.e., the number of people below the poverty line; (2) poverty gap, or shortfall of the poor below the poverty line (a measure of the resources required to eliminate poverty); and (3) severity of poverty. The general formula of FGT is (Foster, Greer, Thorbecke, 1984):

where PL is the poverty line, α s the poverty-aversion parameter, and INCh is household income h. α=0 is the headcount index, α=1 measure the poverty depth, and α=2 gives the measure of poverty severity. Clearly, PL and INC_h hold the key to the poverty measure.

⁷In the Thai model, however, due to a lack of data, the distinction between DOMINTM and FORINTM cannot be made. I want to acknowledge the modeling work of Chanin Manopiniwes, based upon which the Thai model used in this study was developed (Manopiniwes, 2005).

⁸“Asset = Liability + Wealth” is the core balance in the financial module.

⁹Note that the unit of measurement in Figure 14 is in basis point.

¹⁰However, it is important to note that a spending cut of such a large proportion would have resulted in a less desirable, economy-wide outcome as indicated by other endogenous indicators (GDP, consumption, and financial sector variables).

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Comment(s)

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1. Ruly
   (posted 11 July 2008 / 02:08:15 PM)
   
   This paper gives me a new insight about the real condition of my country economy, and how the authority (government) had applied many conventional economic policies, which is not suitable for Indonesian economy that has different characters and conditions from the west, the origin of these conventional policies..
   
   Furthermore, I was very lucky because the author presented this paper in my class as a guess lecturer about 2 months ago. For the first time after 1.5 years studying economics, a lot of my "unanswered" questions being answered, and I even didn't have to ask..