Impact of Monetary Policy and Foreign Direct Investment Against Indonesia's Economic Growth

This study aims to determine the impact of monetary policy and FDI on economic growth and discuss it. The monetary indicator variables used are inflation, interest rates and exchange rates. The data used in this study are secondary data in 1990-2019 sourced from data from the Central Bureau of National Statistics and the World Bank. The analysis model in this study uses Multiple Linear Regression with the Error Correction Model (ECM) analysis model. The results of the analysis show that in the long term monetary variables (inflation, interest rates and exchange rates) have a significant effect on economic growth. And in the short term FDI has a significant effect on economic growth. It is concluded that monetary variables (inflation, interest rates and exchange rates) are the main variables that affect economic growth in the long and short term.

The Stabilizing Effects of Publishing Strategic Central Bank Projections

Expectations are among the main driving forces for economic dynamics. Therefore, managing expectations has become a primary objective for monetary policy seeking to stabilize the business cycle. In this paper, we study whether central banks can manage private-sector expectations by means of publishing one-period ahead inflation projections in a New Keynesian learning-to-forecast experiment. Subjects in the experiment observe these projections along with the historic development of the economy and subsequently submit their own one-period ahead inflation forecasts. In this context, we find that the central bank can significantly manage private-sector expectations and that this management strongly supports monetary policy in stabilizing the economy. Moreover, published central bank inflation projections drastically reduce the probability of a deflationary spiral after strong negative shocks to the economy.

Unconventional Monetary Policy through Open Market Operations: A Principal Component Analysis

This paper examines the unconventional monetary policies of the Bank of Japan from 2002 to 2019 with a focus on open market operations. We apply a principal component analysis to investigate the complexity of monetary policy. Our results identify four principal components that explain the variance of measures taken by the Bank of Japan and its operation of various facilities: asset purchase measures including Japanese Government Bonds (JGBs), Exchange-Traded Funds (ETFs), and Japanese Real Estate Investment Trusts (J-REITs), and three different liquidity supply measures. Complexity differs substantially among different governorships of Fukui, Shirakawa (most complex), and Kuroda. We derive some conclusions from the increased complexity with implications for the economy.

Exchange Rate Pass-Through, Monetary Policy, and Real Exchange Rates: Iceland and the 2008 Crisis

We use detailed data for Iceland to examine two often-neglected aspects of the exchange rate pass-through problem. First, we investigate whether the pass-through coefficient varies with the degree of international tradability of goods. Second, we analyze if the pass-through coefficient depends on the monetary policy framework. We consider 12 disaggregated price indexes in Iceland for 2003–2019, a period that includes Iceland’s banking and currency crisis of 2008. We find that the pass-through declined around the time Iceland reformed its flexible inflation targeting, and that the coefficients are significantly higher for tradable than for nontradables.