Monetary targeting and inflation: Evidence from Indonesia's post-crisis experience

Using cointegration and structural vector autoregression (SVAR) techniques this paper investigates the effect of Bank Indonesia's (BI) monetary policy on inflation during the post-1997 crisis monetary-targeting period. Our analysis suggests that BI's monetary policy does not have systematic impact on the price level, apparently because of unstable money demand. Unreliable effects of BI's monetary policy are reflected in frequent and substantial deviations of the actual inflation rate from its targeted ranges.