dramatic but short-lived decline in the living standards of most Indonesians suggesting an enormously resilient population that took great efforts to weather the storm.<sup>2</sup> In sharp contrast, the impact of the financial crisis on psychological and mental health has not been explored. The goal of this paper is to provide empirical evidence on the extent to which the manifold upheavals and associated stresses of the Indonesian crisis affected the psychological health of the Indonesian population and whether any such effects were long-lasting. In so doing, we contribute new evidence on the psycho-social costs of economic insecurity in developing countries.

Using data from the Indonesia Family Life Survey, we track indicators of psychological distress of the same individuals who were assessed in up to three interviews over a period before, during and after the onset of the crisis. This evidence is contrasted with changes in general health status of the same individuals. We find there are substantively large and significant increases in the prevalence of psychological distress among both male and female adults after the onset of the crisis and this increase persists well beyond the beginning of the crisis. While the effects are apparent across the entire age range, there is a suggestion that older adults are slightly more vulnerable to elevated distress. We also find levels of anxiety are higher after the onset of the crisis among those with less education. The impact of the crisis is also greatest among the rural landless and those who were living in provinces that suffered the greatest toll in terms of the economic costs of the crisis.

# _Psychological health in developing countries_

Although it is generally recognized that psychological health is an important component of individual well-being, there is limited evidence at a population level regarding the prevalence of psychosocial disability in developing countries or its variation within those countries. Over and above the direct consequences on human welfare of poor psychological health, the literature suggests there may be significant economic costs, both for the individual and society at large. Global Burden of Disease estimates indicate that neuro-psychiatric diseases account for about 10% of the total burden of disease and injury (measured in disability-adjusted life years) in low and middle income countries and over 12% of the disease burden in East Asia and the Pacific. About one-third of that diseases burden is attributed to depression. (Lopez et al. 2006). Other leading contributors to the global disease burden that are associated with psychological health include schizophrenia, bipolar disorder and substance abuse.<sup>3</sup>

> 2Studies have described the impact of the crisis on of poverty, consumption and wealth, labor supply, wages and earnings, schooling, physical health and health care utilization (Frankenberg et al. 1999; Suryahadi et al. 2000; Frankenberg et al. 2003; Thomas et al. 2004; Strauss et al., 2004).

> 3 As will be discussed in detail later in the paper, our measures of psychological health are designed to assess overall psycho-social well-being and not specific manifestations of mental illness. While the majority of studies cited are more clinical in nature and hence measure specific classifications of mental illness our results pertain to a generalized notion of psychological health. Specific mental illnesses, such as bipolar depression or generalized anxiety disorder, are subsumed in this general category of psychological distress or ill psychological health.

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