IDEAS home Printed from https://ideas.repec.org/a/icf/icfjmo/v08y2010i1&2p23-44.html
   My bibliography  Save this article

Inflation Expectations and Monetary Policy Rules: Findings from Indonesian Economy

Author

Listed:
  • Syurkani Ishak-Kasim
  • Abdullahi D Ahmed

Abstract

The main objective of this study is to understand how Bank Indonesia conducts its monetary policy as part of the implementation of inflation targeting. The paper adopts a modified Taylor rule for monetary policy decision-making, using public inflation expectations data to complement the traditional use of output gaps. Based on the empirical estimation with Indonesian data, it was found that a modified Taylor rule model using public inflation expectations can replicate reasonably well the current Bank Indonesia policy interest rates. It is also found that a Taylor rule using more frequent (monthly) data can capture and adjust to unexpected shocks more quickly and complement the use of quarterly data as in the original model. The paper finds that, Bank Indonesia has targeted core inflation as its monetary policy objective, and provides evidence that the use of core inflation can improve the bank’s credibility. The findings imply that Bank Indonesia should consider a rule-based policy approach using public inflation expectations and core inflation, if it plans to adopt a monetary policy rule in the future.

Suggested Citation

  • Syurkani Ishak-Kasim & Abdullahi D Ahmed, 2010. "Inflation Expectations and Monetary Policy Rules: Findings from Indonesian Economy," The IUP Journal of Monetary Economics, IUP Publications, vol. 0(1 & 2), pages 23-44, February .
  • Handle: RePEc:icf:icfjmo:v:08:y:2010:i:1&2:p:23-44
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:icf:icfjmo:v:08:y:2010:i:1&2:p:23-44. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (G R K Murty). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.