ESTIMATING INFLATION THRESHOLD IN INDONESIA (2005 Q3 – 2017 Q2)

Abstract

Inflation is an economic phenomenon that concerns various parties. Inflation is not only the concern of the society, but also the concern of the business world, the central bank, and the government. Inflation can affect the society and economy of a country. Many western countries had adopted Inflation Targeting Framework since 1990s as their monetary policy stance to control inflation. In Indonesia Inflation Targeting Framework (ITF) had adopted based on policy rate (BI Rate) as monetary policy stance for Bank Indonesia since July 2005. The dynamic monetary policy changes for monitoring and stabilized the inflation in Indonesia, untrack-able to do research to figure it out the main problems in history of inflation in Indonesia since independent. This study tries to figure it out the red line of the inflation threshold in Indonesia since 2005 Q3 when BI Rate as policy had adopted as monetary policy stance until current in 2017 Q2. The purpose of this research to see what major problems caused inflation high. In addition, this study sees how government can control the inflation back on track.