The effects of monetary policy in Indonesia

مرکز و کتابخانه مطالعات اسلامی به زبان های اروپایی

منو

" The effects of monetary policy in Indonesia "
N. M. Rooskareni

Document Type	:	Latin Dissertation
Language of Document	:	English
Record Number	:	1113368
Doc. No	:	TLpq304430173
Main Entry	:	N. M. Rooskareni
Title & Author	:	The effects of monetary policy in Indonesia\ N. M. Rooskareni
College	:	The Claremont Graduate University
Date	:	1998
student score	:	1998
Degree	:	Ph.D.
Page No	:	228
Abstract	:	The influence of budget deficits and international capital inflows on monetary policy in developing countries has been a major topic of interest. This dissertation addresses important aspects of this question for Indonesia. First, offset and sterilization coefficients are estimated to determine the degree of capital mobility and the extent to which capital flows have affected the Indonesian money supply. Improved tests for fiscal-money linkages and for the relationship between exchange rate depreciation and changes in the domestic component of the money base are also conducted and the effect of sterilization policy on the domestic interest rate is estimated. I carried out the first two objectives by estimating equations for capital inflows and the monetary reaction function, covering the period from 1978:2 to 1993:3 and using the two stage least squares estimation technique. In estimating the equation for the domestic interest rate, I utilized the ordinary least squares method of estimation, covering the period from 1986:4 to 1994:2. The estimated offset coefficient obtained by this study is 0.25, indicating moderate capital mobility. The estimated sterilization coefficients obtained are 0.68 and 0.42. Thus, on average Bank Indonesia offset about 55 percent of an increase in net foreign assets by reducing the domestic component of the money base. In addition, I find that government foreign borrowing leads to higher capital inflows. Thus, combined with intervention policy, it appears that the fiscal-monetary linkage works through the foreign component of the money base rather than the domestic component. Another important finding is that sterilization policy significantly increases the interest rate and hence the cost of sterilization. In addition, the magnitude of this cost is relatively large.
Subject	:	Economics
	:	Economics
	:	exchange rate
	:	Finance
	:	Social sciences