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Jurnal Ekonomi Malaysia

54 (2) 2020 137 – 147

The Effect of Twin-shock on Monetary and Fiscal Policies in Indonesia
Kesan Kejutan Berkembar terhadap Dasar Monetari dan Fiskal di Indonesia

Department of Economics
Universitas Katolik Parahyangan
INDONESIA

chandradst@unpar.ac.id

Abstract

The research aims to investigate whether the monetary and fiscal policies in Indonesia interact with each other as well as the effect of twin shock on the coordination. The study employs the cointegration analysis and Error Correction Model (ECM) to estimate quarterly data from 2001:1 to 2016:4. The study has found the existence of consolidated government budget constraint (GBC) that links the activities of fiscal authority (taxing, spending, and issuing the bond) with the activities of the monetary authority in the short and long run. The study also found the coordination between monetary and fiscal policies both in the short and long run. It is found that the short-run fiscal policy was influenced by the long-run shock of the exchange rate and the short-run monetary policy was influenced by the short and long-run shock of the price level. The study shows the importance of policy coordination in the currency and budget deficit management.

Keywords

error correction model; Fiscal policy; monetary policy; policy coordination; policy interaction
http://dx.doi.org/10.17576/JEM-2020-5402-12
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Bibliography

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Utama, (2020). The Effect of Twin-shock on Monetary and Fiscal Policies in Indonesia. Jurnal Ekonomi Malaysia, 54(2), 137–147. http://dx.doi.org/10.17576/JEM-2020-5402-12

@article{utama2020effect,
  title={The Effect of Twin-shock on Monetary and Fiscal Policies in Indonesia},
  author={Utama, Chandra},
  journal={Jurnal Ekonomi Malaysia},
  volume={54},
  number={2},
  pages={137—147},
 

year={2020},
}

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