Monetary Policy Discipline and Macroeconomic Performance: The Case of Indonesia
Ramayandi, Arief; Rosario, Aleli | December 2010
Abstract
"Lax monetary policy in the United States has been pointed out as one of the responsible factors behind the recent global crisis. Similar loose monetary conditions also prevailed in many European countries before the crisis and were argued to be among the accommodating factors behind the run-up in asset prices that helped trigger the 2007 financial market turmoil. Did a similar situation also prevail in Asia? This paper provides an insight by specifically looking at developments in the conduct of monetary policy in Indonesia during the first decade of this century. It uses an estimated monetary policy rule to provide a benchmark for assessing the actual conduct of the country’s monetary policy. The analysis suggests that a loose monetary policy stance also prevailed in Indonesia in the run-up to the global financial crisis. This situation helps to explain the surge in the country’s inflation and its very high growth in financial condition from late 2007 to 2008. The paper reiterates the need for monetary policy discipline to safeguard the country’s economic stability, and provides lessons to improve its macroeconomic management."
Citation
Ramayandi, Arief; Rosario, Aleli. 2010. Monetary Policy Discipline and Macroeconomic Performance: The Case of Indonesia. © Asian Development Bank. http://hdl.handle.net/11540/1584.ISSN
1655-5252
Keywords
Financial Stability
Financial Management System
Financial Restructuring
Capital Market Development
Erosion
Market Development
Economics
Erosion
International Economics
International Financial Market
Multilateral Financial Institutions
Economic Recession
Market
Crisis
Business recessions
Multilateral development banks
Regulatory reform
Capital
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Citable URI
http://hdl.handle.net/11540/1584Metadata
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