THE DYNAMICS OF INDONESIA INFLATION: WHAT CAN WE LEARN FROM INFLATION DISAGGREGATION?

Authors

IGP Wira Kusuma

Document Type

Article

Abstract

This paper employs disaggregated data of inflation combined with Factor Augmented Vector Auto Regression (FAVAR) to explore the price behaviour in Indonesia. The main finding of this analysis is that price behaviour in Indonesia exhibits heterogeneity. It is evident not only in terms of the magnitude, but also in the direction and the speed of adjustment to the new equilibrium in response to interest rate shock. Price volatility is mainly related to sector specific shocks instead of macroeconomic shocks. Another finding is, the price puzzle weakens once ITF is adopted. Keywords: price disaggregation, inflation, FAVAR, price puzzle.JEL classification: C32, E31, E52

Recommended Citation

Kusuma, IGP Wira (2013) "THE DYNAMICS OF INDONESIA INFLATION: WHAT CAN WE LEARN FROM INFLATION DISAGGREGATION?," Bulletin of Monetary Economics and Banking: Vol. 16: No. 1, Article 8.
DOI: https://doi.org/10.21098/bemp.v16i1.38
Available at: https://bulletin.bmeb-bi.org/bmeb/vol16/iss1/8

First Page

43

Last Page

79

Creative Commons License

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

Country

Indonesia

Affiliation

Bank Indonesia