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Bulletin of Monetary Economics and Banking

Authors

Umar Juoro

Document Type

Article

Abstract

This paper analyze the impact of foreign policy (the Fed) on Indonesia’s monetary economy, focusing on the attention is also to the fund rate. An empirical model of VAR (Vector Auto Regression) is developed to capture the impact of increase in fund rate to Indonesia’s monetary sector. The system of equations covers central bank policy rate, lending rate, inflation, real effective rate (REER), and the output growth. The result shows that the increase of fund rate tended to push Bank Indonesia to increase his policy rate, hence the lending rate. On the other side, positive shock of foreign fund rate lower inflation and output growth, and appreciate the Real Effective Exchange Rate with lag. Keyword: monetary policy, lending rate, inflation, exchange rate.JEL Classification: E52, F41

First Page

81

Last Page

97

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