Observed Inflation‐target Adjustments in an Estimated DSGE Model for Indonesia: Do They Matter for Aggregate Fluctuations?
Denny Lie ()
Economic Papers, 2019, vol. 38, issue 4, 261-285
This paper investigates the role of observed official inflation‐target adjustments in aggregate macroeconomic fluctuations in Indonesia, using an estimated Dynamic Stochastic General Equilibrium model. The paper finds that these adjustments or shocks play a non‐trivial role in the fluctuations of inflation and nominal interest rate in Indonesia. Output fluctuations, however, are virtually unaffected. A counterfactual exercise shows that a faster disinflation policy, through an immediate decrease in Bank Indonesia's inflation target, may have resulted in a lower average inflation and nominal interest rate, with virtually no output loss. The paper also provides additional insights on the contribution of various shocks in driving aggregate fluctuations in Indonesia. Technology and monetary‐policy shocks are found to be the main driving factor for both output and inflation fluctuations. Movements in the nominal interest rate are mostly driven by preference and risk‐premium shocks, with inflation‐target shocks playing a larger role in the longer run.
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Working Paper: Observed inflation-target adjustments in an estimated DSGE model for Indonesia: Do they matter for aggregate fluctuations? (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bla:econpa:v:38:y:2019:i:4:p:261-285
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0812-0439
Access Statistics for this article
Economic Papers is currently edited by Professor Guay Lim
More articles in Economic Papers from The Economic Society of Australia Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().