Evaluating Monetary Transmission Mechanism in Indonesia Through Exchange Rate Channel
October 1, 2013
Wiranata Kusuma, Dimas Bagus, Salina H. Kassim

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Evaluating Monetary Transmission Mechanism in Indonesia Through Exchange Rate Channel Image
Abstract

:This study aims to evaluate the role of exchange rate channel in transmitting mone­tary policy effects in Indonesia by addressing the following questions: (i) to what extent is the contribution of the exchange rate in inflation rate fluctuations in Indonesia? (ii) What are the effects of exchange rate channel in explaining the direct pass through effect in Indonesia; and (iii) can the exchange rate channel explain the trade competitiveness in Indonesia? The study utilizes monthly data spanning from January 1990 to April 2009 and is divided into four sub-periods, namely (i) pre-crisis period: January 1990-July 1997; (ii) crisis period: August 1997-December 2000; (iii) post-crisis period: January 2001-June 2005; and (iv) post-ITF period: July 2005-April 2009. By adopting the standard Vector Autoregression model, the study finds changing nature of the exchange rate channel during the various sub-periods of the study.

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Metrics Icon 202 views  //  128 downloads