MONETARY POLICY IN POST CRISIS INDONESIA: SOME LESSONS LEARNED

Abstract

The base money-targeting framework has shown signs of success in containing the reemergence of inflationary pressures in post crisis Indonesia. We have attributed this initial success to the plausible existence of the monetarist type economic relationships that have lent support to the effectiveness of the framework. Moreover, a clear cut and overriding commitment to maintain monetary stability clearly enhanced the framework’s performance. To further improve the effectiveness of monetary policy in the future, we suggest the use of a full-information strategy in formulating monetary policy such as the one employed by the European Central Bank (ECB).