Towards Improved Monetary Policy in Indonesia: Response to De Brouwer

Ross McLeod ()

Departmental Working Papers from The Australian National University, Arndt-Corden Department of Economics

Abstract: This paper presents a number of responses to Gordon de Brouwer's criticisms of my paper on monetary policy in Indonesia. Among other things, it argues that de Brouwer has failed to disentangle the impact of two exogenous disturbances on prices - and relative prices - during the crisis and post-crisis period. These disturbances were capital flight, which resulted in real depreciation of the rupiah, and rapid growth of base money, which resulted in inflation. Thus all prices rose, but tradables prices rose more than those of non-tradables. The paper also shows that the kind of monetary policy that de Brouwer criticises, which I describe here as active monetary policy, or fine-tuning, is quite different from the one I proposed in my paper - namely passive monetary policy, the settings of which are changed infrequently, if at all. Other misstatements of my arguments and views are also discussed.

Keywords: base money; inflation; depreciation; real exchange rate Length : 9 pages (search for similar items in EconPapers)
JEL-codes: E31 E52 E58 E61 E65 (search for similar items in EconPapers)
Date: 2004-01
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mac, nep-mon and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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