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The shape of the Phillips curve: the case of Indonesia

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  • Rizki E. Wimanda
  • Paul M. Turner
  • Maximilian J. B. Hall

Abstract

It is recognized that the effectiveness of monetary policy in the control of inflation depends critically on the relationship between inflation and the output gap. During booms, inflation is highly sensitive to monetary influences, but during recessions this influence is considerably muted. However, econometric investigation of this phenomenon has mostly focussed on the developed economies. In this article, the shape of the Phillips curve is investigated for Indonesia. Evidence is found of significant nonlinearities in the inflation--output relationship for Indonesia and it is argued that this relationship is best modelled by the capacity-constraint (L-shape) model.

Suggested Citation

  • Rizki E. Wimanda & Paul M. Turner & Maximilian J. B. Hall, 2013. "The shape of the Phillips curve: the case of Indonesia," Applied Economics, Taylor & Francis Journals, vol. 45(29), pages 4114-4121, October.
    • Handle: RePEc:taf:applec:v:45:y:2013:i:29:p:4114-4121
    DOI: 10.1080/00036846.2012.744137
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    References listed on IDEAS

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    7. Wimanda, Rizki E. & Turner, Paul M. & Hall, Maximilian J.B., 2011. "Expectations and the inertia of inflation: The case of Indonesia," Journal of Policy Modeling, Elsevier, vol. 33(3), pages 426-438, May.
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    Cited by:

    1. Danny Hermawan Adiwibowo & Aryo Sasongko & Denny Lie, 2022. "Money Velocity, Digital Currency, And Inflation Dynamics," Working Papers WP/13/2022, Bank Indonesia.
    2. Aginta, Harry, 2023. "Revisiting the Phillips curve for Indonesia: What can we learn from regional data?," Journal of Asian Economics, Elsevier, vol. 85(C).
    3. Yhlas Sovbetov & Muhittin Kaplan, 2025. "Causes of Failure of the Phillips Curve: Does Tranquillity of Economic Environment Matter?," Papers 2511.22785, arXiv.org.

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