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Relative Effectiveness Of Indonesian Policy Choices During Financial Crisis

Author

Listed:
  • Tumpak Silalahi

    (Bank Indonesia)

  • Tevy Chawwa

    (Bank Indonesia)

Abstract

The objective of this paper is to review the impact of crisis and policy measures taken during the crisis, to evaluate the effectiveness of those measures and to analyze the exit strategy in Indonesia. The econometric model was used to evaluate the impact of monetary and fiscal policy to economic output using quarterly data from 1990 - 2010. The result shows that monetary and fiscal policies have significant impact to economic output. In the short run the changes in real GDP is significantly affected by changes in real monetary supply in the previous three quarter and real fiscal expenditures. The lesson learned from this research among other are that cooperation and coordination among the policy makers and the timely responses are very important in tackling the crisis; an effective conventional monetary policy in normal times may become less effective in a crisis thus unconventional monetary policy indeed necessary as timely policy response and the improvement for more timely disbursement of government expenditure is important to increase the effectiveness of this policy to stimulate economic output. Moreover, several Indonesian exit strategy and policies to face future challenges are very important to reach the ultimate objective of sustainable economic growth while maintaining macroeconomic stability.

Suggested Citation

  • Tumpak Silalahi & Tevy Chawwa, 2011. "Relative Effectiveness Of Indonesian Policy Choices During Financial Crisis," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 14(2), pages 187-228, October.
  • Handle: RePEc:idn:journl:v:14:y:2011:i:2d:p:187-228
    DOI: https://doi.org/10.21098/bemp.v14i2.462
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    More about this item

    Keywords

    monetary policy; fiscal policy; financial sector policy; global financial crisis;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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