ANALYSIS OF INFLATION AND MONETARY POLICY: CASE STUDY OF INDONESIA
Ari Eko Hartoyo, Professor Ching-Yang Lin
2012 | Tesis | S2 Magister Ek.Pembangunan-
In this study, I examine the Bank Indonesia’s monetary policy rule over the periods before and during the financial crisis (1991-1998) and after the crisis (1999- 2011). The empirical findings indicate that before the crisis, Bank Indonesia’s policy is based on the peg exchange rate regime; while after the crisis, the monetary policy rule can be well characterized as a Taylor rule style interest rate rule. Specifically, after 1998, the Bank Indonesia officially pursuing an implicit form of inflation targeting, the monetary policy turns to maintain the price stabilization by adjusting the interest rate based on the expected inflation and output gap. The evidence also suggests that other macroeconomic indicates, such as the federal fund rate, exchange rates are not incorporated in the monetary policy reaction functions.
Kata Kunci : Bank Indonesia’s monetary policies, Taylor interest rate rule, Inflation Targeting Framework, forward looking policy, Generalized Method of Moments
