The Dynamics of Indonesian Inflation: What can We Learn from Inflation Disaggregation?

Wira Kusuma Igp ()

Bulletin of Monetary Economics and Banking, 2013, vol. 16, issue 1, 39-72

Abstract: This paper employs disaggregated data of inflation combined with Factor Augmented Vector Auto Regression (FAVAR) to explore the price behaviour in Indonesia. The main finding of this analysis is that price behaviour in Indonesia exhibits heterogeneity. It is evident not only in terms of the magnitude, but also in the direction and the speed of adjustment to the new equilibrium in response to interest rate shock. Price volatility is mainly related to sector specific shocks instead of macroeconomic shocks. Another finding is, the price puzzle weakens once ITF is adopted.

Keywords: rice disaggregation; inflation; FAVAR; price puzzle (search for similar items in EconPapers)
JEL-codes: C32 E31 E52 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:16:y:2013:i:1i:p:39-72

DOI: 10.21098/bemp.v16i1.437

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