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 research was conducted to examine the relationship between 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 research show that there is a different response by inflation to each. 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, which is different from after the implementation of the ITF where the contribution of shocks to inflation is much smaller, while for the interest rate variable the response to inflation tends to fluctuate before the implementation of the ITF and tends to be negative after the implementation of the ITF and the contribution of shocks to inflation is much greater than other variables.
Keywords: Indonesian Monetary Policy, Inflation Targeting Framework (ITF), Vector Error Correction Model (VECM), M2, Interest Rate, Exchange Rate.
