IDEAS home Printed from https://ideas.repec.org/a/vrs/reoecp/v15y2015i2p137-156n2.html
   My bibliography  Save this article

Does the Credible Fiscal Policy Support the Prices Stabilization?

Author

Listed:
  • Kuncoro Haryo

    () (Faculty of Economics, State University of Jakarta, Indonesia)

Abstract

This paper aims at analyzing the co-movement between fiscal policy and monetary policy rules in the context of price stabilization. More specifically, we observe the potential impact of fiscal policy credibility on the price stabilization in the inflation targeting framework. Motivated by the fact that empirical studies concerning this aspect are still limited, we take the case of Indonesia over the period 2001-2013. Based on the quarterly data analysis, we found that the impact of credibility typically depends on characteristics of fiscal rules commitment. On one hand, the credibility of debt rule reduces the inflation rate. In contrast, the incredible deficit rule policy does not have any impact on the inflation rate and therefore does not support to inflation targeting. Given those results, we conclude that credibility matters in stabilizing price levels. Accordingly, those findings suggest tightening coordination between monetary and fiscal policy to maintain fiscal sustainability in accordance with price stabilization policy

Suggested Citation

  • Kuncoro Haryo, 2015. "Does the Credible Fiscal Policy Support the Prices Stabilization?," Review of Economic Perspectives, Sciendo, vol. 15(2), pages 137-156, June.
  • Handle: RePEc:vrs:reoecp:v:15:y:2015:i:2:p:137-156:n:2
    as

    Download full text from publisher

    File URL: https://www.degruyter.com/view/j/revecp.2015.15.issue-2/revecp-2015-0014/revecp-2015-0014.xml?format=INT
    Download Restriction: no

    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:vrs:reoecp:v:15:y:2015:i:2:p:137-156:n:2. 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: (Peter Golla). General contact details of provider: https://www.sciendo.com/services/journals .

    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.