The Fed’s Tapering Talk: A Short Statement’s Long Impact on Indonesia

Abstract:

Muhamad Chatib Basri, June 2016

In this paper, Dr. Muhamad Chatib Basri, who was Indonesia’s Minister of Finance during the Taper Tantrum (TT) period, analyzes the response to the TT of the five hardest-hit countries, dubbed the “Fragile Five” (Brazil, India, Indonesia, South Africa, and Turkey), and describes how Indonesia was able to mitigate the negative effects of the TT so quickly and effectively. Dr. Basri’s account provides many insights in the realm of macroeconomic management amidst external shocks that should be quite useful to emerging markets as the Fed now contemplates raising interest rates, which could have the same impact as the TT. Dr. Basri wrote this paper while a Senior Fellow at the Ash Center for Democratic Governance and Innovation and is now in the Department of Economics at the University of Indonesia. 

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