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Policy assignment on money supply: the case of Indonesia in the 1980s

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  • Taguchi, Hiroyuki

Abstract

Indonesia has taken a series of the most drastic deregulatory steps on the financial sector among Asian developing countries since the 1980s. The financial deregulation has contributed to the accommodation of the loanable funds necessary for its intensive investment. Indonesia, on the other hand, has managed to curb inflation at the annual rate below double digits by controlling money supply. When we focus on the stance of monetary policy in the long-run view, investment requires the expansion of money supply, and price stability requires its contraction. Thus, the monetary policy in Indonesia has been on a double-edged sword. This article describes how Indonesia has struggled with "double-track" targets on monetary policy, and evaluates its policy performance from the viewpoint of its workability and consistency.

Suggested Citation

  • Taguchi, Hiroyuki, 1995. "Policy assignment on money supply: the case of Indonesia in the 1980s," MPRA Paper 63813, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:63813
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    File URL: https://mpra.ub.uni-muenchen.de/63813/1/MPRA_paper_63813.pdf
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    References listed on IDEAS

    as
    1. R McKinnon, 1991. "Financial Control in the Transition to a Market Economy," CEP Discussion Papers dp0040, Centre for Economic Performance, LSE.
    2. Taguchi, Hiroyuki, 1993. "Financial deepening and economic growth in the Asia-Pacific region: a lesson from financial deregulation in Indonesia," MPRA Paper 64844, University Library of Munich, Germany.
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    Cited by:

    1. Siregar, Reza & Rajaguru, Gulasekaran, 2005. "Sources of variations between the inflation rates of Korea, Thailand and Indonesia during the post-1997 crisis," Journal of Policy Modeling, Elsevier, vol. 27(7), pages 867-884, October.

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    More about this item

    Keywords

    money supply; Indonesia; financial deregulation;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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