Title : ANALYSIS OF THE RELATIONSHIP OF MONETARY VARIABLES IN INDONESIA BEFORE AND AFTER THE IMPLEMENTATION OF THE INFLATION TARGETING FRAMEWORK POLICY PERIOD (1991.1-2010.4)
Author : DHANIAR AJI ANGGORO
Universitas Airlangga
Item Type : Thesis (Thesis)
Abstract
This study was conducted to examine the relationship of monetary variables in Indonesia before and after the implementation of the inflation targeting framework (ITF) which is divided into two periods, namely 1991.1-2000.4 and 2001.1-2010.4. This paper specifically examines the relationship of each variable, namely the exchange rate, interest rate and M2 to inflation in both periods using the vector error correction model (VECM), the results of this study indicate that there is a different response by inflation to each variable before and after the implementation of the ITF where the response to the exchange rate tends to be positive before the implementation of the ITF and has a large shock contribution in contrast to after the implementation of the ITF where the shock contribution to inflation is much smaller, while in the interest rate variable the inflation response tends to fluctuate before the implementation of the ITF and tends to be negative after the implementation of the ITF and the shock contribution to inflation is much greater compared to other variables.
Keywords: Indonesian Monetary Policy, Inflation Targeting Framework (ITF), Vector Error Correction Model (VECM), M2, Interest Rate, Exchange Rate.