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Towards Implementation Of Inflation Targeting In Indonesia

Author

Listed:
  • Halim Alamsyah
  • Charles Joseph
  • Juda Agung
  • Doddy Zulverdy

Abstract

The experience of high inflation accompanying the economic crisis in 1998 has brought back painful memories of hyperinflation in the 1960s. Success with inflation targeting (IT) in other countries has prompted Indonesia to consider this framework as the basis for monetary policy,a response that seems justified on at least two grounds. First, monetary policy needs a new anchor after the abandonment in 1997 of the previous regime of managed floating. Second, the central bank law enacted in 1999 prescribes stability of the value of the rupiah as Bank Indonesia's sole objective. This paper explores the future framework of monetary policy under a formal IT approach and highlights the constraints Bank Indonesia faces in implementing such an approach. It discusses the monetary policy framework before and during the crisis, and in the post-crisis period. It then goes on to outline a preliminary design for a suitable IT framework for Indonesia.

Suggested Citation

  • Halim Alamsyah & Charles Joseph & Juda Agung & Doddy Zulverdy, 2001. "Towards Implementation Of Inflation Targeting In Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 37(3), pages 309-324.
  • Handle: RePEc:taf:bindes:v:37:y:2001:i:3:p:309-324 DOI: 10.1080/00074910152669154
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Siregar, Reza Yamora & Goo, Siwei, 2010. "Effectiveness and commitment to inflation targeting policy: Evidence from Indonesia and Thailand," Journal of Asian Economics, Elsevier, pages 113-128.
    2. Ross McLeod, 2003. "Towards improved monetary policy in Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, pages 303-324.
    3. Siregar, Reza Yamora & Goo, Siwei, 2010. "Effectiveness and commitment to inflation targeting policy: Evidence from Indonesia and Thailand," Journal of Asian Economics, Elsevier, pages 113-128.
    4. Paul Deuster, 2002. "Survey Of Recent Developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, pages 5-37.
    5. Ross McLeod, 2003. "Towards improved monetary policy in Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, pages 303-324.
    6. Narayan, Paresh Kumar, 2007. "Is money targeting an option for Bank Indonesia?," Journal of Asian Economics, Elsevier, pages 726-738.
    7. Ross H. McLeod, 2004. "Towards Improved Monetary Policy in Indonesia: Response to De Brouwer," Departmental Working Papers 2004-01, The Australian National University, Arndt-Corden Department of Economics.
    8. Reza Siregar & Siwei Goo, 2008. "Inflation Targeting Policy: The Experiences Of Indonesia And Thailand," CAMA Working Papers 2008-23, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.

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