Monetary and macroprudential policies in the presence of external shocks: evidence from an emerging economy
ISSN: 0144-3585
Article publication date: 22 July 2021
Issue publication date: 24 August 2022
Abstract
Purpose
This paper examines the impact of using the reserve requirements, combined with foreign exchange (FX) intervention, as key instruments in an inflation-targeting framework.
Design/methodology/approach
In the context of a dynamic stochastic general equilibrium (DSGE) framework and using Bayesian techniques, the authors estimate a model for the Indonesian economy using quarterly data spanning the period 2005Q2–2019Q4.
Findings
The reserve requirement is found to assume a complementary role to that of the interest rate policy and FX intervention when used to stabilise the macroeconomy.
Originality/value
This paper provides a benchmark for other emerging countries that consider adopting the inflation targeting framework and impose an FX intervention as part of their monetary policy.
Keywords
Citation
Lubis, A., Alexiou, C. and Nellis, J.G. (2022), "Monetary and macroprudential policies in the presence of external shocks: evidence from an emerging economy", Journal of Economic Studies, Vol. 49 No. 6, pp. 960-977. https://doi.org/10.1108/JES-11-2020-0577
Publisher
:Emerald Publishing Limited
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