Siregar, Reza (2009): Pursuing Inflation Targeting Policy Framework in the Midst of Inflationary Pressures and Fiscal Constraint in Indonesia.
Download (196kB) | Preview
Pushing for a higher and a more robust growth while maintaining price stability within a target range of inflation continue to be core tasks for the macroeconomic policy management in Indonesia in recent years. Whilst inflation was successfully kept below the target of 7 percent at the end of 2007, the monthly year on year inflation has already gone above 10 percent by May 2008 and is expected to reach 11 percent by end of 2008. Fiscal policy continues to be relatively marginalized and lacks of stimulus, with a significant share of the current expenditure of the 2008 budget has to be allocated to finance subsidy and debt service. Our study investigates the commitment of the country to its inflation targeting (IT) policy in the midst of fiscal constraint and the urgent need to push for higher growth rate. It examines preliminary outcomes of the IT policy and highlights dilemmas and potential policy trade-offs.
|Item Type:||MPRA Paper|
|Original Title:||Pursuing Inflation Targeting Policy Framework in the Midst of Inflationary Pressures and Fiscal Constraint in Indonesia|
|Keywords:||Inflation Targeting Policy; Expenditure Policy; Inflation; and Fiscal Constraint|
|Subjects:||E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy
|Depositing User:||Reza Yamora Siregar|
|Date Deposited:||22. Nov 2009 03:38|
|Last Modified:||23. Feb 2013 05:00|
Asian Development Bank (ADB) (2008a), Asia Economic Monitoring, July(www.aric.adb.org).
Asian Development Bank (ADB) (2008b), “Reasons to be Nervous: Commodity Prices and Inflation”, the Asian Development Outlook, March.
Aglionbay, J. and Oakley, D. (2008), “Jakarta Bond Sale Failure Reflects Fears About Emerging Markets”, Financial Times, September 10.
Bernanke, B. and Mishkin, F.S. (2007), “Inflation Targeting: A New Framework for Monetary Policy?” in Mishkin (ed), Monetary Policy Strategy, The MIT Press, Cambridge, Massachusetts, USA.
Campa, J.M. and Goldberg, L.S. (2002), “Exchange Rate Pass-Through into Import Prices: A Macro or Micro Phenomenon?,” NBER Working Paper, No. 8934, May.
Clarida, R. (2001), “The Empirics of Monetary Policy Rules in Open Economies”, International Journal of Finance and Economics, 6(4), pp. 315-323.
Clarida R., Gali, J., and Gertler, M. (1998), “Monetary Policy Rules in Practice: Some International Evidence”, European Economic Review, 42(6), pp. 315-323.
Chadha, J.S., Sarno, L., and Valente, G. (2004), “Monetary Policy Rules, Asset Prices, and Exchange Rates”, IMF Staff Papers, Vol.51, No. 3.
Corbo, V., Landerretche, O., and Schmidt-Hebbel, K. (2001), “Assessing Inflation Targeting After a Decade of World Experience”, International Journal of Finance and Economics, 6, pp.343-368.
Edwards, S. (2006). “The Relationship Between Exchange Rates and Inflation Targeting Revisited,” NBER Working Paper, No.12163, April.
Gagnon, Joseph E. and Jane Ihrig (2004). “Monetary Policy and Exchange Rate Pass- Through,” International Journal of Finance and Economics, 9(4), pp. 315-338.
Giavazzi, F. (2003). “Inflation Targeting and the Fiscal Policy Regime: The Experience in Brazil”, Bank of England Quarterly Bulletin, Autumn.
Hamilton, J.D. (1989), “A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle”, Econometrica, 57(2), pp.357-384.
Hamilton, J. and Susmel, R. 1994, ‘Autoregressive Conditional Heteroscedasticity and Changes in Regime’, Journal of Econometrics, vol. 64, pp. 307-333.
Hendry, D.F. (1976). The structure of simultaneous equations estimators. Journal of Econometrics, 4, 51-88.
Hodrick, R.J. and Prescott, E.C. (1997), “Postwar U.S. Business Cycles: An Empirical Investigation”, Journal of Money, Credit and Banking, Vol. 29, No. 1 (February) , pp. 1-16.
Jha, S. (2008), “Indonesia: Inflation Up, Rally in Bonds Over!”, Emerging Market Research,Barclay Capital, 30 July.
Krolzig, H.-M. (1997). Markov Switching Vector Autoregression. Berlin: Springer-Verlag.
OECD(2008), Indonesia Economic Assessment, July.
Siregar, R. and Goo, S. (2008), “Inflation Targeting Policy: The Experience of Indonesia and Thailand”, CAMA Working Paper, No.23, the Australian National University, July (http://cama.anu.edu).
Siregar, R. and Gunawan, A. (2008), “Outward Investment Surge in the Midst of Weak Inward Investment: Perspectives from the Indonesian Experience during the Post- 1997 Financial Crisis”, in R. Kumar and R. Rajan (eds), Intra-Asian FDI Flows: Magnitudes, Trends, Prospects and Policy Implications. World Scientific Press (forthcoming).
Svensson, L.E.O. (2000), “Open Economy Inflation Targeting”, Journal of International Economics, 50(1), pp. 155-183.
Taylor, J. B. (2000), “Low Inflation, Pass-Through, and the Pricing Power of Firms,” European Economic Review, 44(7), pp. 1389-1408.
Taylor, J.B. (2001), “The Role of the Exchange Rate in Monetary-Policy Rules”, American Economic Review, Vol. 91, No.2, Papers and Proceeding of the Hundred Thirteenth.
Trehan, B. and Wu, T. (2007), “Time-Varying Equilibrium Real Rates and Monetary Policy Analysis”, Journal of Economic Dynamic & Control, 31, pp. 1584-1609.
Valente, G. (2003), “Monetary Policy Rules and Regime Shifts”, Applied Financial Economics, 13(7), pp.525-535.