LESSONS LEARNED FROM INDONESIA�S HIGHEST INFLATION RATE

• Main Authors: , Pramudia Mulyono Muslim, , Prof. Yoshino Fumio
• Format: Theses and Dissertations NonPeerReviewed
• Published: [Yogyakarta] : Universitas Gadjah Mada 2013
• Subjects: ETD
• Online Access: https://repository.ugm.ac.id/123543/; http://etd.ugm.ac.id/index.php?mod=penelitian_detail&sub=PenelitianDetail&act=view&typ=html&buku_id=63655
• Institution: Universitas Gadjah Mada

Indonesia suffered under a high inflation rate in 1966. The inflation rate rose to 635.3% which is the highest rate in the history of Indonesian, even one of the most severe in all Asian countries. The inflation affected the economy and also the politic. During the high inflation period in the 1960s, the average growth of GDP per capita for the period of 1960-1967 declined 0.25% and was subsequently followed by the downfall of the first political and economic regime. This study discusses the Indonesia�s economy during those few years before 1966 that eventually determine the high-speed acceleration of the inflation rate and years after that showed how the policies undertaken by the administrators could lessen the high inflation rate. Simply, large budget deficits financed by money creation lead to the high inflation rate. The feedback relationship among those two factors made the inflation rate uncontrollable and caused it to reach to levels never imagine before. Starting from the 1960 budget deficits became larger each subsequent year