•  
  •  
 

Abstract

The key challenge for monetary policy in emerging market countries is simultaneously maintain monetary independence, exchange rate stability, and join with financial integration. This research explain the interaction of monetary policy in Indonesia over time to answer those three challenge with a Trilemma conditions. This research evaluate the Bank Indonesia’s decision to change the exchange rate regime and applied ”inflation targeting”. The methods include to build the Trilemma’ index and testing the Trilemma with constant regression. The results indicate that Bank Indonesia has tradeoff in determining the combination of monetary policy objectives. Tradeoff for Bank Indonesia more heavy under free floating due to fear of floating’s problem and tradeoff lighter when inflation targeting applied.

Bahasa Abstract

Tantangan utama kebijakan moneter di negara berkembang adalah secara bersamaan dapat mempertahankan independensi moneter, menjaga stabilitas nilai tukar, dan terlibat dalam integrasi keuangan global. Penelitian ini menjelaskan bagaimana kombinasi kebijakan moneter di Indonesia dari waktu ke waktu dapat menjawab ketiga tantangan tersebut dengan memenuhi kondisi Trilemma. Penelitian ini mengevaluasi keputusan Bank Indonesia mengubah rezim nilai tukar dan keputusan menerapkan target inflasi. Metode yang digunakan yaitu membangun indeks Trilemma dan mengujinya menggunakan constant regression. Hasilnya menunjukkan bahwa Bank Indonesia menghadapi tradeoff dalam menentukan kombinasi tujuan kebijakannya. Tradeoff lebih berat ketika periode rezim free floating karena adanya masalah fear of floating, sedangkan tradeoff lebih ringan ketika penerapan inflation targeting.

References

[1] Aizenman, J., & Ito, H. (2014). The ”Impossible Trinity,” the International Monetary Framework, and the Pacific Rim. In I. Kaur & N. Singh (Eds.), The Oxford Handbook of the Economics of the Pacific Rim, pp. 551–586. Oxford University Press. Diakses dari http: //www.oxfordhandbooks.com/view/10.1093/oxfordhb/ 9780199751990.001.0001/oxfordhb-9780199751990-e-021. Tanggal akses 23 Oktober 2016.

[2] Aizenman, J., Chinn, M. D., & Ito, H. (2008). Assessing the Emerging Global Financial Architecture: Measuring the Trilemma’s Configurations Over Time. NBER Working Paper 14533. National Bureau of Economic Research. doi: 10.3386/w14533. Diakses dari http://www.nber.org/papers/ w14533.pdf. Tanggal akses 23 Oktober 2016.

[3] Aizenman, J., Chinn, M. D., & Ito, H. (2010). The Emerging Global Financial Architecture: Tracing and Evaluating New Patterns of the Trilemma Configuration. Journal of International Money and Finance, 29(4), 615–641. doi: https: //doi.org/10.1016/j.jimonfin.2010.01.005.

[4] Alpanda, S.,&Honig, A. (2014). The Impact of Central Bank Independence on the Performance of Inflation Targeting Regimes. Journal of International Money and Finance, 44, 118– 135. doi: https://doi.org/10.1016/j.jimonfin.2014.02.004.

[5] Andriani, Y., & Gai, P. (2013). The Effect of Central Bank Independence on Price Stability: The Case of Indonesia. Buletin Ekonomi dan Perbankan, 15(4), 367–390. http://www.bi.go.id/id/publikasi/jurnalekonomi /Documents/YessyAndrianiPrasannaGai.pdf.

[6] Borensztein, E., Zettelmeyer, J., & Philippon, T. (2001). Monetary Independence in Emerging Markets: Does the Exchange Rate Regime Make a Difference?. IMF Working Paper WP/01/1. International Monetary Fund. Diakses dari https://www.imf.org/external/pubs/ft/wp/2001/wp0101. pdf. Tanggal akses 23 Oktober 2016.

[7] Calvo, G. A., & Carmen, M. R. (2002). Fear of Floating. The Quarterly Journal of Economics, 117(2), 379–408.

[8] Dilla, S. (2014). Exchange Rate Pass-Through dalam Konteks Inflation Targeting Framework: Kasus Empiris di 19 Negara di Dunia. Tesis. Sekolah Pascasarjana Institut Pertanian Bogor.

[9] Frankel, J., Schmukler, S. L., & Serven, L. (2004). Global Transmission of Interest Rates: Monetary Independence and Currency Regime. Journal of International Money and Finance, 23(5), 701–733. doi: https: //doi.org/10.1016/j.jimonfin.2004.03.006.

[10] Garg, G. (2015). Impact of Trilemma Indicators on Macroeconomic Policy: Does Central Bank Independence Matter?. Mumbai: Indira Gandhi Institute of Development Research. Diakses dari http://www.igidr.ac.in/pdf/publication/WP-2015-019. pdf. Tanggal akses 23 Oktober 2016.

[11] Ghosh, A. R., Gulde, A. M., Ostry, J. D., & Wolf, H. C. (1997). Does the Nominal Exchange Rate Regime Matter?. NBER Working Paper 5874. National Bureau of Economic Research. doi: 10.3386/w5874. Diakses dari http://www.nber. org/papers/w5874.pdf. Tanggal akses 23 Oktober 2016.

[12] Glick, R., & Hutchison, M. (2008). Navigating the Trilemma: Capital Flows and Monetary Policy in China. Federal Reserve Bank of San Francisco Working Paper 32. Diakses dari https://www.frbsf.org/economic-research/files/ wp08-32bk.pdf. Tanggal akses 23 Oktober 2016.

[13] Hadiwibowo, Y., & Komatsu, M. (2011). Trilemma and Macroeconomic Policies Under Different Financial Structures in Indonesia. Journal of Asian Economics, 22(4), 302–310. doi: https://doi.org/10.1016/j.asieco.2011.03.002

[14] Hausmann, R., Gavin, M., Pages-Serra, C., & Stein, E. (1999). Financial Turmoil and the Choice of Exchange Rate Regime. Working Paper 400. New YorkAvenue, N.W.: Inter-American Development Bank.

[15] Hsing, Y. (2012). Effects of the Trilemma Policies on Inflation, Growth and Volatility in Bulgaria. Theoretical and Applied Economics, XIX(4(569)), 49–58.

[16] Hsing, Y. (2013). Testing the Trilemma Hypothesis and Measuring Their Effects on Inflation, Growth and Volatility for Poland. Montenegrin Journal of Economics, 9(3), 57–63.

[17] Hutchison, M., Sengupta, R., & Singh, N. (2012). India’s Trilemma: Financial Liberalisation, Exchange Rates and Monetary Policy. The World Economy, 35(1), 3–18. doi: 10.1111/j.1467-9701.2011.01381.x.

[18] Ito, H., & Kawai, M. (2012). New Measures of the Trilemma Hypothesis: Implications for Asia. ADBI Working Paper 381. Asian Development Bank Institute. Diakses dari https://www.adb.org/sites/default/files/publication/ 156236/adbi-wp381.pdf. Tanggal akses 23 Oktober 2016.

[19] Ito, T., & Sato, K. (2006). Exchange Rate Changes and Inflation in Post-Crisis Asian Economies: VAR Analysis of the Exchange Rate Pass-Through. RIETI Discussion Paper Series 06-E-018. Diakses dari https://www.rieti.go.jp/ jp/publications/dp/06e018.pdf. Tanggal akses 23 Oktober 2016.

[20] Ihnatov, I., & Capraru, B. (2014). The Trilemma Policies and Macroeconomic Volatility in Central and Eastern Europe. Procedia Economics and Finance, 15, 853–857. doi: https://doi.org/10.1016/S2212-5671(14)00547-4.

[21] Kadir M., A., Widodo, P. R., & Suryani R., G. (2008). Penerapan Kebijakan Moneter dalam Kerangka Inflation Targeting di Indonesia. Seri Kebanksentralan No. 21. Bank Indonesia. Diakses dari http://www.bi.go.id/id/publikasi/seri-kebanksentralan/ Documents/21.%20Penerapan%20Kebijakan% 20Moneter%20Dlm%20Kerangka%20Inflasi.pdf. Tanggal akses 23 Oktober 2016.

[22] Kementerian Keuangan. (2012). Liberalisasi Jasa Keuangan Indonesia dalam Menghadapi Paket ke-6 Perundingan Liberalisasi Jasa Keuangan ASEAN. Laporan Hasil Kajian. Pusat Kebijakan Regiional dan Bilateral, Badan Kebijakan Fiskal, Kementerian Keuangan. Diakses dari https://www.kemenkeu.go.id/sites/default/files/kajian. pkrb .fsl .2012.pdf. Tanggal akses 23 Oktober 2016.

[23] Kuncoro, H. (2015). Inflation Targeting, Exchange Rate Pass-through, and Monetary Policy Rule in Indonesia. International Journal of Business, Economics and Law, 7(3), 14–25.

[24] Kurniati, Y. (2007). Exchange Rate Pass-Through in Indonesia. Working Paper BI WP/09. Bank Indonesia.

[25] Lane, P. R., & Milesi-Ferretti, G. M. (2006). The External Wealth of Nations Mark II: Revised and Extended Estimates of Foreign Assets and Liabilities, 1970– 2004. IMF Working Paper WP/06/69. Washington, DC: International Monetary Fund. Diakses dari http: //www.imf.org/en/Publications/WP/Issues/2016/12/31/ The-External-Wealth-of-Nations-Mark-II-Revised-and- Extended-Estimates-of-Foreign-Assets-and-18942. Tanggal akses 23 Oktober 2016.

[26] Mundell, R. A. (1963). Capital Mobility and Stabilization Policy Under Fixed and Flexible Exchange Rates. Canadian Journal of Economics and Political Science/Revue canadienne de economiques et science politique, 29(4), 475–485. doi: https: //doi.org/10.1017/S0315489000030036.

[27] Nugroho, U. (2001). Pengukuran Independensi Bank Indonesia : Penggunaan Metode Alex Cukierman. Tesis. Universitas Indonesia.

[28] Obstfeld, M., Shambaugh, J. C., & Taylor, A. M. (2003). The Trilemma in History: Tradeoffs among Exchange Rates, Monetary Policies, and Capital Mobility. Review of Economic and Statistics, 87(3), 423–438. doi: https: //doi.org/10.1162/0034653054638300.

[29] Prijambodo, B. (2006). Evaluasi Implementasi Langkah-langkah Penguatan Kebijakan Moneter dengan Sasaran Akhir Kestabilan Harga. Badan Perencanaan Pembangunan Nasional. Diakses dari https://www.bappenas.go.id/files/3513/5230/0772/ evaluasi.pdf. Tanggal akses 23 Oktober 2016.

[30] Sahminan, S. (2005). Exchange Rate Pass-Through into Import Prices in Major Southeast Asian Countries. Paper based on chapter II PhD dissertation. The University of North Carolina at Chapel Hill. Diakses dari https://papers.ssrn. com/sol3/papers.cfm?abstract id=1295056. Tanggal akses 23 Oktober 2016.

[31] Satryo, A. (2015). Analisis Exchange Rate Pass Through, Fear of Floating, dan Implementasi Inflation Targeting. Skripsi. Bogor: Institut Pertanian Bogor.

[32] Schoenmaker, D. (2011). The Financial Trilemma. Economics Letters, 111(1), 57–59. doi: https: //doi.org/10.1016/j.econlet.2011.01.010.

[33] Shambaugh, J. C. (2004). The E ect of Fixed Exchange Rates on Monetary Policy. The Quarterly Journal of Economics, 119(1), 301–352. doi: https: //doi.org/10.1162/003355304772839605.

[34] Sugeng, S., Nugroho, M. N., Ibrahim, I., & Yanfitri, Y. (2010). Effects of Foreign Exchange Supply And Demand Dynamics to Rupiah Exchange Rate and Economic Performance. Bulletin of Monetary Economics and Banking (Buletin Ekonomi Moneter dan Perbankan), 12(3), 289–328. doi: http: //dx.doi.org/10.21098/bemp.v12i3.374.

[35] Tambunan, T. T. H. (2010). The Indonesian Experience with Two Big Economic Crises. Modern Economy, 1(3), 156–167. doi: 10.4236/me.2010.13018.

[36] Utari, M. (2014). Market-to-Retail Pass-Through dan Faktorfaktor Struktur Finansial yang Mempengaruhinya. Tesis. Institut Pertanian Bogor.

[37] Warjiyo, P., & Juhro, S. M. (2016). Kebijakan Bank Sentral: Teori dan Praktik. Jakarta: Rajawali Press.

[38] Yanuarti, T., & Hutabarat, A. K. (2006). The Comparison of Inflation Determinants in Indonesia, Malaysia, Thailand, and the Philippines. Bank Indonesia Working Paper 20.

Download

Included in

Economics Commons

Share

COinS
 
 

To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.