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Bulletin of Monetary Economics and Banking

Document Type

Article

Abstract

Bank Indonesia has applied the Inflation Targeting Framework (ITF) to reach its single-final objective; stabilizing Rupiah reflected in the inflation and its exchange rate. The central bank of Indonesia uses the interest rate as his operational target to achieve the targeted inflation. Regardless of whether Bank Indonesia uses the Certificate of Bank Indonesia (SBI) or the money market rate (PUAB), on empirical ground the targeted inflation is hard to achieve.This paper analyzes the monetary policy of Bank Indonesia and its impact on macroeconomic variables. The application of Differenced Vector Autoregressive (DVAR) method shows that the monetary policy has a direct impact on the time deposit rate and an indirect impact on the exchange rate, money supply, gross domestic product and on consumer’s price index.JEL Classification: C32, E52, E58Keywords: SBI Interest Rate Mechanism, DVAR, IRF, FEVD

First Page

21

Last Page

52

Creative Commons License

Creative Commons Attribution-NonCommercial 4.0 International License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Country

Indonesia

Affiliation

Gadjah Mada University

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