Does Monetary Policy Respond to Macroeconomic Shocks? Evidence  from Indonesia

Arintoko, Arintoko; Kadarwati, Nunik

doi:10.18196/jesp.v23i2.14881

Cited by 3 publications

(5 citation statements)

References 26 publications

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“…Raising interest rates has increased the demand for the rupiah and appreciated its exchange rate. This finding supports the study conducted by Arintoko and Kadarwati (2022) in the case of Indonesia, Fang and Zhang (2021) in the case of RMB China, and Garg and Prabheesh (2021) in a case of Brazil, Russia, India, China, and South Africa (BRICS countries) and also Pham (2019) in case of Vietnam. Bank Indonesia's 7-days (reverse) repo rate as a proxy of the central bank interest rate has the highest effect compared to other explanatory variables used in this study in maintaining the rupiah exchange rate.…”

Section: Resultssupporting

confidence: 90%

The COVID-19 pandemic and the exchange rate: a lesson learned from Indonesia

Sunaryati

Munandar

2023

JESP

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This paper aims to capture the relationship between the COVID-19 pandemic and the exchange rate. We utilized high-frequency data by utilizing daily data from January 21st, 2020, through June 29th, 2022. In contrast to the vast majority of research that disregards the incubation period of COVID-19 in the number of daily transmission cases, we use the growth of COVID-19 as a 14-day moving average of confirmed cases as the main independent variables. Findings indicate that the devaluation of the rupiah exchange rate is long-term associated with the increase in COVID-19 cases and deaths. According to the efficient market hypothesis, the rupiah depreciates due to the increase of COVID-19 transmission, which is publicized by the media. In the midst of the debate over the impact of the pandemic on the exchange rate and using Indonesia as a lesson learned for emerging market economies, our research is a recent study that examines this topic with completed data-generating processes – when the pandemic entered its last wave phase. In regard to exchange rate behavior, the disease outbreak channel exists. The government must restrict widespread media coverage of data on the spread of COVID-19 while focusing on accelerating measures to control the pandemic. A low-interest rate imposed by the monetary authorities as an effort to stimulate economic recovery can also exert pressure on the exchange rate, necessitating the optimization of other instruments, such as foreign exchange intervention.

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Section: Resultssupporting

confidence: 90%

The COVID-19 pandemic and the exchange rate: a lesson learned from Indonesia

Sunaryati

Munandar

2023

JESP

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“…Despite its use as a countercyclical tool to stimulate economic growth, monetary policy can also lead to an increase in prices due to an increase in money supply. This outcome is consistent with the findings of previous studies (Arintoko & Kadarwati, 2022;Nyumuah, 2018;Abbasinejad et al, 2018;Sethi et al, 2019;Mandel et al, 2019;Arintoko, 2021;Tai Nguyen et al, 2022).…”

Section: Discussionsupporting

confidence: 93%

“…The results differ from those of (Paksi, 2021), who states that the interest rate has no significant impact on economic growth. (Arintoko & Kadarwati, 2022) Show that interest rates respond positively to unexpected GDP changes. There are different results for the interest rate and inflation because the interest rate is a government tool to control higher inflation.…”

Section: Discussionmentioning

confidence: 99%

“…The relationship between economic growth and monetary policy, specifically the role of policy interest rates, was extensively examined by (Arintoko & Kadarwati, 2022) using the VAR method, which showed that policy interest rates respond positively to unexpected GDP changes. Previous studies have suggested that monetary policy plays a crucial role in regulating economic growth, inflation, and exchange rates (Nyumuah, 2018); (Abbasinejad et al, 2018); (Sethi et al, 2019); (Mandel et al, 2019) (Arintoko, 2021); (Tai Nguyen et al, 2022).…”

Section: Theoretical Reviewmentioning

confidence: 99%

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Impact Analysis Of Monetary And Fiscal Policies On Indonesia’s Economic Growth

Rachmawaty,

Oktrima,

Waluyo Jati

2024

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After the Covid-19 pandemic, the world faced economic challenges stagflation, namely high inflation and declining economic growth. To overcome this, the Government made arrangements through monetary and fiscal policies. This study analyses the effect of monetary and fiscal policies on Indonesia's economic growth. This research has eight obtained monetary, fiscal and other macro-economic variables, a novelty compared to the previous researcher. Based on the impulse response analysis in the Vector Error Correction Model, the highest impacted variables to maintain economic growth were the growth of income tax and capital market index, and to negatively impact were exchange money and government expenditure. Over an extended period, it shows that the increase in inflation, money exchange, number of broad-money, interest rate, and government expenditure will impact the decrease of economic growth. In contrast, the increase in government income from tax and capital market indexes will impact the increase in economic growth.

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“…The interest rate is one variable affecting inflation (Kurniawan et al, 2022). The interest rate is one of the main instruments for monetary policy conducted by central banks (Arintoko & Kadarwati, 2022;Johari et al, 2022). Sulistiana et al (2017) found that the interest rate, proxied by the BI rate (interest rate targeted by the Indonesian central bank), is the most dominant factor that affects inflation.…”

Section: Introductionmentioning

confidence: 99%

Inflation forecasting using autoregressive distributed lag (ARDL) models

Ponziani

2023

JESP

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This study attempts to evaluate and compare the inflation-predicting performance of several ARDL models. Since there was no cointegration, the ARDL model does not employ an error correction term. Subsequently, model development showed that ARDL(2,2) should be used. Besides the formally developed model, some other more arbitrarily chosen ARDL models were also included, i.e., ARDL(1,1), ARDL(2,0), ARDL(1,0), ARDL(0,1), and ARDL(0,2). This research measures forecasting performance with inflation as the forecasting object. The duration of the monthly inflation statistics ranged from January 2011 to July 2022. The data were separated into two categories. The training data ranged between January 2011 and December 2021. After getting the appropriate parameters from the training data, the models generated projections from January 2022 to July 2022. The research determined that ARDL (1,0) was the most accurate inflation forecasting model, followed by ARDL (0,2) and formally constructed ARDL(2,2) finished in fourth place. This study suggests that the formal development of ARDL for forecasting purposes is unnecessary. Formal ARDL development is more appropriate for root cause analysis. In addition, the single autoregressive component indicates that most of the inflation value's information originated from the prior period. This suggests that the previous period's value is Indonesia's most significant predictor of inflation. The impact of greater period lags on inflation forecasting diminishes immediately.

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Does Monetary Policy Respond to Macroeconomic Shocks? Evidence from Indonesia

Cited by 3 publications

References 26 publications

The COVID-19 pandemic and the exchange rate: a lesson learned from Indonesia

The COVID-19 pandemic and the exchange rate: a lesson learned from Indonesia

Impact Analysis Of Monetary And Fiscal Policies On Indonesia’s Economic Growth

Inflation forecasting using autoregressive distributed lag (ARDL) models

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