ANALISIS KEBIJAKAN MONETER DALAM MODEL MAKROEKONOMETRIK STRUKTURAL JANGKA PANJANG: STRUCTURAL COINTEGRATING VECTOR AUTOREGRESSION

The paper analyzes the monetary policy behavior by developing a long-run structural macroeconometric model; the Structural Cointegrating Vector Autoregression. The model is empirically proposed by Garratt et. al. (1998 and 1999) and adopted to suit the indonesian case.The result shows that the model perform well in explaining the monetary policy behavior in Indonesia. However, due to the limitation of data, and a re-orientation of monetary policy, we should carefully examine and interpreting the magnitude of parameters used on the model.Keywords: Kebijakan Moneter di Indonesia, Model Makro Struktural Jangka Panjang, Structural Cointegration Vector Autoregression (VAR).JEL Classification: C32, C51, E52, E58

Comments on “Capital Flow Deflection under the Magnifying Glass”

This paper explores my comments on "Capital Flow Deflection under the Magnifying Glass", a paper by Fillipo Gori et al. (2020), which is a coherent and timely overview of the major policy concerns on capital flow behavior, especially capital flow deflection. The paper explores quite extensive identification strategies, including robustness checks which are convincing in revealing spillovers. It also elaborates relevant assessment and leaves grounds for renewing a call for deeper international coordination of capital account policies, as collective policy coordination can mitigate negative externalities arising from unilateral actions. Unfortunately, it poses a relatively limited number of literatures, particularly empirical studies and policy perspectives on whether or not they support the findings. My discussion on this paper will explore more upon the bigger-picture of central bank policy issues, rather than the technical aspects. To conclude the discussion, we need to seek a state of urgency in how to bring together AEs and EMEs common mutual beneficial interests amidst increasing financial liberalization

RESPON KEBIJAKAN MONETER YANG OPTIMAL DI INDONESIA: The State-Contingent Rule?

By developing a long-run macro structural model, The Structural Cointegrating Vector Autoregression (VAR), the optimality principle of monetary policy response in Indonesia is formulated. It accommodates not only long-run policy response and short-run dynamic errorcorrection mechanism, but also specific shocks emerged due to structural changes in the economy. In that context, the generated policy response basically reflects the optimal response of a “state-contingent rule”, different from common simple policy rules, such as Taylor rule and McCallum rule. This study captures several important aspects related to the implementation of “state-contingent rule” as an optimal monetary policy in Indonesia, namely: (i) the superiority of interest rate as a policy variable, or an operational target, against monetary base, (ii) the identification of monetary policy lag which is estimated averagely one-and-a half year, and (iii) the sub optimality of central bank monetary policy response, attributed by an over tight or loose policy response. JEL Classification: C32, E52 Keywords: Kebijakan Moneter di Indonesia, Respon Kebijakan Moneter, Structural Cointegration Vector Autoregression(VAR)

Kurva Phillips dan Perubahan Struktural di Indonesia : Keberadaan, Pola Pembentukan Ekspektasi, dan Linieritas

Terdapat tiga isu strategis yang menjadi pijakan penelitian empiris mengenai Kurva Phillips dalam dua dekade terakhir, yaitu: (i) apakah hubungan atau trade-off tersebut secara empiris terjadi dalam suatu perekonomian dan bagaimana hubungan atau trade-off tersebut terjadi dalam horison waktu yang berbeda? (ii) apakah hubungan atau trade-off tersebut bersifat linier (simetri) atau non linier (tidak simetri)?, dan (iii) bagaimana implikasi dari hubungan atau trade-off tersebut terhadap penerapan kebijakan ekonomi? Dengan tujuan umum untuk menjawab isu-isu strategis tersebut, fenomena Kurva Phillips akan dianalisis pada lingkup kegiatan ekonomi makro. Secara khusus, hal penting yang juga diamati adalah kemungkinan perubahan perilaku Kurva Phillips sebagai respons terhadap perubahan fundamental perekonomian, khususnya sebagai akibat krisis ekonomi 1997. Dari kajian yang dilakukan disimpulkan bahwa fenomena Kurva Phillips eksis dalam perekonomian Indonesia, dimana keberadaan dan perilaku kurva tersebut mengalami perubahan dari waktu ke waktu, sejalan dengan perubahan struktur fundamental perekonomian (regime dependent). Secara khusus, pola pembentukan ekspektasi dan linieritas dalam Kurva Phillips mengalami perbedaan (perubahan) yang signifikan antara periode pre dan pasca krisis

KARAKTERISTIK TEKANAN INFLASI DI INDONESIA: PENGARUH DINAMIS SISI PERMINTAAN-PENAWARAN DAN PROSPEK KE DEPAN

This preliminary study is aimed to look into characteristics of inflation and sources of shocks triggering inflation pressures in Indonesia. A focus will be directed to find a better measurement about the role of supply and demand shocks. Based on parsimonious model estimation, it can be concluded that the contribution of supply shocks predominant demand shocks ‘proportionally’, implying that a prudent monetary policy is still feasible and can be implemented effectively along with the structural efforts to combat inflation in Indonesia. A further preliminary exercise shows that the prospect of inflation pressures in two year ahead will be statistically the same with the 2006 inflation pressures. However, cautious policy response should be taken in the second year as inflation pressures from supply side will be potentially greater. Keywords: Characteristics of inflation, supply shock, demand shock, inflation, Indonesia. JEL Classification:  JEL Classification: E31, P2

NEW SOURCES OF GROWTH: THE ROLE OF FRUGAL INNOVATION AND TRANSFORMATIONAL LEADERSHIP

This paper’s main thesis is that frugal innovation and transformational leadership offeradditional sources of growth. Our main contribution is the proposal of what we referto as the breakthrough possibility frontier (BPF) model, which integrates two aspectsof leadership: innovation quality (frugal innovation) and leadership competency(transformational leadership). We test the BPF model on two groups of respondents,one group consisting of university students who had never been formal leadersand the other formal leaders who had office experience. The BPF analysis suggeststhat transformational leadership is a game changer, required for breakthroughs.Transformational leadership is key to encouraging innovation quality and leadershipcompetency and, we argue, to facilitating new sources of growth. Our results implythe development of an integrated institutional framework for innovation. We believethat innovative leadership development programs that can be easily implementedand replicated in other regions are needed to develop transformational leadershipcompetencies.This paper’s main thesis is that frugal innovation and transformational leadership offeradditional sources of growth. Our main contribution is the proposal of what we referto as the breakthrough possibility frontier (BPF) model, which integrates two aspectsof leadership: innovation quality (frugal innovation) and leadership competency(transformational leadership). We test the BPF model on two groups of respondents,one group consisting of university students who had never been formal leadersand the other formal leaders who had office experience. The BPF analysis suggeststhat transformational leadership is a game changer, required for breakthroughs.Transformational leadership is key to encouraging innovation quality and leadershipcompetency and, we argue, to facilitating new sources of growth. Our results implythe development of an integrated institutional framework for innovation. We believethat innovative leadership development programs that can be easily implementedand replicated in other regions are needed to develop transformational leadershipcompetencies

FORECASTING INDONESIAN INFLATION WITHIN AN INFLATION-TARGETING FRAMEWORK: DO LARGE-SCALE MODELS PAY OFF?

We examine the usefulness of large-scale inflation forecasting models in Indonesia within an inflation-targeting framework. Using a dynamic model averaging approach to address three issues the policymaker faces when forecasting inflation, namely, parameter, predictor, and model uncertainties, we show that large-scale models have significant payoffs. Our in-sample forecasts suggest that 60% of 15 exogenous predictors significantly forecast inflation, given a posterior inclusion probability cut-off of approximately 50%. We show that nearly 87% of the predictors can forecast inflation if we lower the cut-off to approximately 40%. Our out-of-sample forecasts suggest that large-scale inflation forecasting models have substantial forecasting power relative to simple models of inflation persistence at longer horizons.We examine the usefulness of large-scale inflation forecasting models in Indonesia within an inflation-targeting framework. Using a dynamic model averaging approach to address three issues the policymaker faces when forecasting inflation, namely, parameter, predictor, and model uncertainties, we show that large-scale models have significant payoffs. Our in-sample forecasts suggest that 60% of 15 exogenous predictors significantly forecast inflation, given a posterior inclusion probability cut-off of approximately 50%. We show that nearly 87% of the predictors can forecast inflation if we lower the cut-off to approximately 40%. Our out-of-sample forecasts suggest that large-scale inflation forecasting models have substantial forecasting power relative to simple models of inflation persistence at longer horizons

COVID-19 UNCERTAINTY AND MONETARY POLICY RESPONSES: EVIDENCE FROM EMERGING MARKET ECONOMIES

This paper examines the effectiveness of monetary policy transmission in emerging economies during the COVID-19 outbreak. Using data from 14 emerging economies severely affected by the pandemic and the autoregressive distributed lag approach to cointegration, the study examines the effectiveness of monetary policy in affecting output, inflation, and credit. The study finds that: (1) In most economies, the monetary policy transmission to inflation is weakened due to the uncertainty created by the COVID-19 pandemic; (2) in a few economies, the transmission is found to be effective in stabilizing credit and output; and (3) the outbreak of the COVID-19 pandemic induced economic agents to follow a “cautionary” or “wait and see” approach