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Measurement of the efficiency of monetary policy

Author

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  • Eka Purwanda
  • Siti Herni Rochana

    (STIE STEMBI Bandung Business School, Bandung, Indonesia.
    Institut Teknologi Bandung, Bandung, Indonesia.)

Abstract

Since 2000, monetary policy in Indonesia started to use Inflation Targeting Framework (ITF). To evaluate the performance of the monetary policy, it requires efficiency indicators. The measurement of the efficiency of monetary policy is based on inflation and output variations. This paper formulates a method for measuring the efficiency of monetary policy and applies it in Indonesia. It finds that since the implementation of ITF, the efficiency of monetary policy has not changed significantly. However, the efficiency of monetary policy tends to increase after the full implementation of the ITF framework after 2005 than in the transition period of 2000-2005.

Suggested Citation

  • Eka Purwanda & Siti Herni Rochana, 2017. "Measurement of the efficiency of monetary policy," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 9(2), pages 138-149, April.
    • Handle: RePEc:uii:journl:v:9:y:2017:i:2:p:138-149
    DOI: 10.20885/ejem.vol9.iss2.art3
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    monetary policy; inflation targeting framework; loss function; efficiency.;
    All these keywords.

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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