Inflation Dynamics in Indonesia: Equilibrium Correction and Forward-Looking Phillips Curve Approaches

A hybrid model of new Keynesian Phillips Curve: An application in Indonesia

“…The results of this study strengthen the results of researches done by Gali and Gertler (1999) in the United States, Gali et al (2001) in Europe, Sbordone (2002), Amato and Gerlach (2000), and Insukindro and Sahadewo (2010) in Indonesia, which explained that the forward-looking variable has a dominant influence. However, what makes it different from the previous studies is on the use of steady state model in answering the purpose of this study.…”

“…Second, the researches done by Gali and Gertler (1999) in the United States, Gali et al (2001) in Europe, Sbordone (2002), and Amato and Gerlach (2000) explained that the variable forward-looking has a dominant influence and is able to explain the inflation dynamics in Europe and USA. This result is also in line with the research done by Insukindro and Sahadewo (2010) in Indonesia.…”

Capital Intensity, Openness, and the Economic Growth of the Asean 5

“…Due to the linear combination of variables involving different degrees of integration, then the data with the highest degree of integration will be integrated with a series of variables that have the lowest degree of integration (Pagan & Wickens, 1989). Regressions using data on level will provide invalid estimation results and cannot be interpreted (Insukindro & Sahadewo, 2010).…”

Inflationary effects of fiscal and monetary policies in Indonesia

“…However, these studies do not include shock variables that probably emerge in the economy. Furthermore, we use a single period welfare loss function at period t   t WLF which involves shock variables to construct the estimable dynamic model as also used in previous research (Domowitz & Elbadawi, 1987;Gupta & Uwilingiye, 2008;Insukindro & Sahadewo, 2010;Yağcıbaşı & Yıldırım, 2017). The proposed model begins with some reasons of using single period welfare loss function and then followed by the construction of estimable error correction model.…”