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Central Bank Policy Mix: Policy Perspectives and Modeling Issues

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Abstract

This paper discusses the core model of Bank Indonesia policy mix (BIPOLMIX), a macroeconomic modeling breakthrough designed for economic and financial projections and policy simulations. The BIPOLMIX model captures the integrated central bank policy responses, e.g. monetary, macroprudential, and payment system policies, and considers the role of fiscal policy. The strategy of developing the model is flexible, dynamic, and forward-looking to make the model relevant as the basis for Bank Indonesia policy transformation in coping with challenges in a rapidly changing environment. In this regard, the model takes into account various economic dynamics and policy instrument mix in optimizing the achievement of macroeconomic and financial system stability. Amid main issues related to the model parameter consistency, in line with theoretical and technical considerations, the modeling framework is believed to be useful as a pivotal reference by the central banks in EMEs in developing core models to support optimal policy responses.

Suggested Citation

  • Juhro, Solikin M., 2022. "Central Bank Policy Mix: Policy Perspectives and Modeling Issues," MPRA Paper 114451, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:114451
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    References listed on IDEAS

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    1. Jordi Galí & Tommaso Monacelli, 2005. "Monetary Policy and Exchange Rate Volatility in a Small Open Economy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(3), pages 707-734.
    2. Juda Agung & Solikin M Juhro & Harmanta & Tarsidin, 2016. "Managing monetary and financial stability in a dynamic global environment: Bank Indonesia s policy perspectives," BIS Papers chapters, in: Bank for International Settlements (ed.), Expanding the boundaries of monetary policy in Asia and the Pacific, volume 88, pages 157-188, Bank for International Settlements.
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    Cited by:

    1. Narayan, Paresh Kumar & Garg, Bhavesh & Gunadi, Iman & Rishanty, Arnita, 2024. "How are green stocks and monetary policy related?," Pacific-Basin Finance Journal, Elsevier, vol. 87(C).
    2. Juhro, Solikin M. & Iyke, Bernard Njindan & Narayan, Paresh Kumar, 2024. "Capital flow dynamics and the synchronization of financial cycles and business cycles in emerging market economies," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 92(C).
    3. Solikin M. Juhro & Denny Lie & Atet Rizki Wijoseno & Mohammad Aly Fikry, 2022. "Fiscal Policy Stance, Central Bank Digital Currency, And The Optimal Monetary-Macroprudential Policy Mix," Working Papers WP/01/2022, Bank Indonesia.
    4. Sharif, Taimur & Bouteska, Ahmed & Zoynul Abedin, Mohammad & Cotturone, Saulo, 2025. "An enquiry into the monetary policy and stock market shocks in the US," International Review of Economics & Finance, Elsevier, vol. 98(C).

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    Keywords

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    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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