This evaluation shows interactions between monetary policy and macroprudential regulations in Indonesia, highlighting their effects on inflation and financial stability.
Key Points
A one-standard-deviation increase in the policy interest rate lowers inflation by 0.4 percentage points.
Inflation variability is attributed 21.2% to monetary policy shocks in the short run and 22.5% in the long run.
Capital inflows explain 4.2% and 11.5% of inflation variability over short and long horizons.
The study suggests that a coordinated policy mix enhances Indonesia’s financial system resilience against disturbances.