Abstract
The magnitude of the rise in inflation rate in Indonesia during the height of the 1997
financial crisis was among the sharpest that the East Asian economies has ever
witnessed in the recent decades. This paper empirically tests the monetary hypotheses
of inflation and compares and contrasts the sources of price changes during the pre- and
post-1997 financial crisis. We find a high explanatory power of the monetary model for
the post-crisis period, but not for the pre-crisis. The high volatilities of the local currency
and the unprecedented rapid growth rate of base money during the post-crisis are found
to be the two key monetary determinants of the inflation in the country.
financial crisis was among the sharpest that the East Asian economies has ever
witnessed in the recent decades. This paper empirically tests the monetary hypotheses
of inflation and compares and contrasts the sources of price changes during the pre- and
post-1997 financial crisis. We find a high explanatory power of the monetary model for
the post-crisis period, but not for the pre-crisis. The high volatilities of the local currency
and the unprecedented rapid growth rate of base money during the post-crisis are found
to be the two key monetary determinants of the inflation in the country.
| Original language | English |
|---|---|
| Place of Publication | Adelaide |
| Publisher | Centre for International Economic Studies |
| Number of pages | 44 |
| Publication status | Published - Aug 2002 |
| Externally published | Yes |