Asymmetric responses of fiscal policy to the inflation rate in Indonesia

Jaka Sriyana and Jiyao Ge ()
Additional contact information
Jiyao Ge: School of Economics, University of Sydney, Australia

Economics Bulletin, 2019, vol. 39, issue 3, 1701-1713

Abstract: This paper examines the responses of fiscal policy to the inflation rate in Indonesia based on the annual data from 1971 to 2017. We use a nonlinear autoregressive distributed lag model (NARDL) to investigate the pattern of those responses. This study finds the existence of a long-run equilibrium relationship among set variables of the budget deficit, government spending, and inflation rate. The results also reveal asymmetric responses of both fiscal variables to the inflation rate in short and long-run models. We also assert that government spending contributes higher than budget deficit on the increase in the inflation rate. These findings fill the literature regarding the empirical findings of asymmetric effects of fiscal policy on the inflation rate. This paper also concludes the important role of the fiscal policy on the price stabilization through government spending management. It implies that the central government should review the quality of government spending allocation in all sectors to eliminate inflationary effects of various fiscal policies.

Keywords: asymmetric; budget deficit; government; fiscal; inflation (search for similar items in EconPapers)
JEL-codes: H3 H5 (search for similar items in EconPapers)
Date: 2019-07-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.accessecon.com/Pubs/EB/2019/Volume39/EB-19-V39-I3-P161.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-19-00054

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().