Did Bank Indonesia cause the credit crunch of 2006–2008?

Bank lending in Indonesia slowed dramatically during the period 2006–2008 while, at the same time, the banks’ holdings of short-term public sector (and other riskless) securities increased substantially. For some, this provided clear evidence of a central bank-induced credit crunch arising from Bank Indonesia’s regulatory (with respect to risk-based capital and risk management requirements) and monetary policy tightening. This paper, based on...