Central Bank Policy Mix: Policy Perspectives and Modeling Issues

Juhro, Solikin M. and UNSPECIFIED (2022): Central Bank Policy Mix: Policy Perspectives and Modeling Issues.

Abstract

This paper discusses the core model of Bank Indonesia policy mix (BIPOLMIX), a macroeconomic modeling breakthrough designed for economic and financial projections and policy simulations. The BIPOLMIX model captures the integrated central bank policy responses, e.g. monetary, macroprudential, and payment system policies, and considers the role of fiscal policy. The strategy of developing the model is flexible, dynamic, and forward-looking to make the model relevant as the basis for Bank Indonesia policy transformation in coping with challenges in a rapidly changing environment. In this regard, the model takes into account various economic dynamics and policy instrument mix in optimizing the achievement of macroeconomic and financial system stability. Amid main issues related to the model parameter consistency, in line with theoretical and technical considerations, the modeling framework is believed to be useful as a pivotal reference by the central banks in EMEs in developing core models to support optimal policy responses.

• Item Type: MPRA Paper
• Language: English
• Keywords: Central Bank Policy Mix, Policy Modeling, Projections and Simulations, Bank Indonesia.
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E37 - Forecasting and Simulation: Models and Applications; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies

References

Agung, J., Juhro, S.M., Harmanta & Tarsidin (2016), Managing Monetary and Financial Stability in a Dynamic Global Environment: Bank Indonesia’s Policy Perspectives, BIS Working Paper, No. 88. Bernanke, B.S., M. Gertler, and S. Gilchrist, 1999. “The financial accelerator in a quantitative business cycle framework” in Taylor, J.B. and M. Woodford (ed), Handbook of Macroeconomcs Vol 1, page 1341- 1393, Elsevier. Juhro, S.M., Narayan, P.K., & Iyke, B.N (2022a), Understanding Monetary and Fiscal Policy Rules Interaction in Indonesia, Applied Economics. Juhro, SM., Ridhwan, MHA., & Rishanty, A. (2022b), Bank Indonesia Economic Modelling: Framework, Method, and Application, Bank Indonesia Institute. Juhro, S. M., Iyke, B.N, & Narayan, P.K., (2021), Capital Flow Dynamics and Synchronization of Financial and Business Cycles in Emerging Markets. Bank Indonesia Working Paper. Juhro, S. M. & M. Goeltom, 2015. “Monetary Policy Regime in Indonesia,” in A. Kohsaka (ed.) Macro-Financial Linkages in the Pacific Region. London-New York: Routledge. Gali, J. & Monacelli, T. (2005). “Monetary Policy and Exchange Rate Volatility in a Small Open Economy.” Review of Economic Studies, 72(3), 707-734. Harmanta, et.al. (2013). “ARIMBI with Macroprudential Policy.” Working Paper WP/1/2013, DKM Bank Indonesia. Waluyo, J., Primayudha, R., Sahminan, S. (2019). “Model Semi-Struktural Bauran Kebijakan Bank Indonesia dan Pemerintah (ARIMBI 2019).” Laporan Hasil Penelitian No. LHP/1/DKEM/2019, Bank Indonesia. Warjiyo, P. & S. M. Juhro, Eds. (2022), Central Bank Policy Mix: Issues, Challenges, and Policy Responses, Handbook of Central Banking Study, Springer Publishing. Warjiyo P. & S M. Juhro, 2019. Central Bank Policy: Theory and Practice. Emerald Publishing, London. Wijoseno, A., Waluyo, J., Bathaluddin, MB., Purwanto, NMA., Devin, Astuti, RI., Oktavianti, D., Atras, MF., Harun, CA., Sahminan, Kusuma, IGP., & Affandi, Y. (2021). “Model BIPOLMIX (BI Policy Mix); Interaksi Kebijakan Moneter - Makroprudensial,” Laporan Hasil Penelitian No. LHP/5/DKEM/2021, Bank Indonesia.