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Policy Mix: Supply-Side Policies To Address The Trend Of Rising Inflation

Author

Listed:
  • Donni F. Anugrah

    (Bank Indonesia)

  • Danny Hermawan

    (Bank Indonesia)

  • Denny Lie

    (University of Sydney)

  • Solikin M. Juhro

    (Bank Indonesia)

  • Misbahol Yaqin

    (Bank Indonesia)

Abstract

In line with the dynamics of inflation in the last 10 years in ASEAN, especially inIndonesia, this research analyzes the factors that influence inflation in Indonesiaand ASEAN. Apart from that, this research also reviews the role of supply-sidepolicies to overcome inflation trends. The panel data used is 34 provinces inIndonesia from 2010Q1 to 2022Q4 using the GMM method. Meanwhile, for theASEAN analysis, data from three countries, namely Indonesia, the Philippines and Vietnam, were included for the same time period and used the ARDL method. Theestimation results for the Indonesian case show that food price inflation is influencedby Gross Regional Domestic Product (GRDP), wages, food imports, global food pricesand National Religious Holidays (HKBN). From a policy perspective, this researchalso finds that apart from (conventional) monetary policy which influences demand (through interest rates), there is a role for food subsidies which influence the supplyside in stabilizing food prices in Indonesia. These findings are also confirmed in theempirical analysis for selected ASEAN countries. This implies that a mix of monetarypolicy and food subsidies can be used to control food prices in Indonesia.

Suggested Citation

  • Donni F. Anugrah & Danny Hermawan & Denny Lie & Solikin M. Juhro & Misbahol Yaqin, 2023. "Policy Mix: Supply-Side Policies To Address The Trend Of Rising Inflation," Working Papers WP/11/2023, Bank Indonesia.
    • Handle: RePEc:idn:wpaper:wp112023
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    More about this item

    Keywords

    Food Inflation; Food Subsidies; GMM;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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