KEBIJAKAN INFLATION TARGETING: ANTISIPASI KRISIS NILAI TUKAR
Keywords:
inflation targeting, monetary policy, capital flowAbstract
This paper examines workability of inflation targeting policy after one year and half of its application in Indonesia, based on a method of descriptive analysis using macro-prudential indicators. In addition, non-parametric approach to earlier warning system of monitoring Rupiah stability against the US Dollar is also employed as a comparison. These two macro-prudential and non-parametric approaches may predict the probability of weakening the Indonesian currency against USD. The results show unsatisfaction of the inflation targeting policy as a stabilizing instrument to control both inflation and rupiah movement against USD. This happens due to unsatisfaction of some prerequisites for conducting the policy, such as remaining weaknesses of financial institutions as indicated by the weakness of government regulation and control, significant off-shore loan or foreign debt and risky sudden stops from capital inflows (external domination).References
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