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Towards Improved Monetary Policy in Indonesia: Response to De Brouwer

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  • Ross H. McLeod

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.

Suggested Citation

  • Ross H. McLeod, 2004. "Towards Improved Monetary Policy in Indonesia: Response to De Brouwer," Departmental Working Papers 2004-01, The Australian National University, Arndt-Corden Department of Economics.
    • Handle: RePEc:pas:papers:2004-01
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    File URL: https://crawford.anu.edu.au/acde/publications/publish/papers/wp2004/wp-econ-2004-01.pdf
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    References listed on IDEAS

    as
    1. Ross McLeod, 2003. "Towards improved monetary policy in Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 39(3), pages 303-324.
    2. Halim Alamsyah & Charles Joseph & Juda Agung & Doddy Zulverdy, 2001. "Towards Implementation Of Inflation Targeting In Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 37(3), pages 309-324.
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    Cited by:

    1. Lloyd Kenward, 2004. "Survey of recent developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 40(1), pages 9-35.

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    More about this item

    Keywords

    base money; inflation; depreciation; real exchange rate Length : 9 pages;
    All these keywords.

    JEL classification:

    • 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
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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