FACTORS INHIBITING DEFLATIONARY BIAS IN CURRENCY BOARD ECONOMIES: EVIDENCE FROM THE COLONIAL ERA

A traditional criticism of currency boards is that they impart a deflationary bias to growing economies. Three factors, however, may inhibit the bias: increases in the velocity of money; increases in the monetary base, which under a currency board occur only through balance-of-payments surpluses; and increases in the money multiplier. This article investigates each of the factors in Fiji, Ghana, Jamaica and Malaya over various periods near the end of the colonial era. Except in Malaya, where the money multiplier declined, all helped prevent deflationary outcomes. In broad terms, growth in the monetary base was the most important.     

The Improvement in Indonesia's Real Resource Alance, 1986–89: Absorption,Switching and Growth Effects 1

This paper seeks to quantify the immediate determinants of the large improvement in Indonesia's real resource balance (balance of trade in goods and services at constant prices) over the period 1986–89. The paper uses a framework which distinguishes between tradable and non-tradable products to decompose the change in the real resource balance into the effects of changes in absorption, expenditure-switching, output-switching and economic growth. The results show that each of the three annual increases in the real resource balance between 1986 and 1989 was the outcome of positive growth and expenditure-switching effects dominating negative absorption and output-switching effects.     

Macroeconomic Management in Asian-Pacific Developing Countries

This article surveys the literature on macro-economic policy in East Asian and Pacific developing countries. Both internal and external aspects of macroeconomic policy are covered, but greater emphasis is placed on the former. After reviewing regional work on macroeconomic policy objectives and on the conflicts, constraints and trade-offs faced by policy makers, an examination is made of research into target/instrument frameworks for the analsyis and design of policy. Then follow sections dealing with the specific instruments of monetary and fiscal policy. Finally, attention is drawn briefly to topics found in the literature but bypassed in this survey, and to gaps in the regional literature itself.     

Book Reviews

Andrew Macintyre, Business and Politics in Indonesia, Sydney: Allen and Unwin, in Association with the Asian Studies Association of Australia, 1991, pp. xv + 282. A$24.95.

Scott Pearson, Walter Falcon, Paul Heytens, Eric Monke and Rosamond Naylor, Rice Policy in Indonesia, Ithaca and London: Cornell University Press, 1991, pp. xii + 180. US$32.95.

Raymond J. Struyk, Michael L. Hoffman and Harold M. Katsura, The Market for Shelter in Indonesian Cities, Jakarta and Washington DC: Hasfarm Dian Konsultan and the Urban Institute Press, 1990, pp. xxiv + 475.

P. Boomgaard and A. J. Gooszen, Changing Economy in Indonesia, Volume 11: Population Trends 1795–1942, Amsterdam: Royal Tropical Institute, 1991, pp. 253. Dfl. 48.00.

Peter Boomgaard, Children of the Colonial State: Population Growth and Economic Development in Java, 1795–1880, Centre for Asian Studies Amsterdam, Monograph 1, Amsterdam: Free University Press, 1989, pp. x + 247. Paper: Dfl. 49.50.

Mohamed Ariff (ed.), The Pacific Economy: Growth and External Stability, Sydney: Allen and Unwin, 1991, pp. xvi + 322. Cloth: A$45.00; Paper: A$29.95.

L. Th. Schmit, Rural Credit Between Subsidy and Market: Adjustment of the Village Units of Bank Rakyat Indonesia in Sociological Perspective, Leiden: Leiden Development Studies No. 11, Leiden University, 1991, pp. 343. US$18.00.

Richard H. Patten and Jay K. Rosengard, Progress with Profits: The Development of Rural Banking in Indonesia, San Francisco: International Centre for Economic Growth and Harvard Institute for International Development, 1991, pp. xix + 114. US$9.95.

Hal Hill (Ed.), Indonesia Assessment 1991, Political and Social Change Monograph 13, Canberra: Department of Political and Social Change, Research School of Pacific Studies, Australian National University, 1991, pp. xx + 196. A$16.00.

Penjabaran Demokrasi Ekonomi [The Understanding of Economic Democracy], Jakarta: Ikatan Sarjana Ekonomi Indonesia [The Indonesian Economists Association], 1990, pp. v + 27 (Indonesian Version), v + 21 (English Version). Available from the ISEI Jakarta Office.

BRIEFLY NOTED: General Agreement On Tariffs and Trade (Gatt), Trade Policy Review — Indonesia 1991, 2 Volumes, Geneva, 1991.