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Respon Kebijakan Moneter yang Optimal di Indonesia: The State-Contingent Rule?

By developing a long-run macro structural model, The Structural Cointegrating Vector Autoregression (VAR), the optimality principle of monetary policy response in Indonesia is formulated. It accommodates not only long-run policy response and short-run dynamic errorcorrection mechanism, but also specific shocks emerged due to structural changes in the economy. In that context, the generated policy response basically reflects the optimal response of a ≈state-contingent ruleΔ, different from common simple policy rules, such as Taylor rule and McCallum rule. This study captures several important aspects related to the implementation of ≈state-contingent ruleΔ as an optimal monetary policy in Indonesia, namely: (i) the superiority of interest rate as a policy variable, or an operational target, against monetary base, (ii) the identification of monetary policy lag which is estimated averagely one-and-a half year, and (iii) the sub optimality of central bank monetary policy response, attributed by an over tight or loose policy response..Printed Journal

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