Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/86559
Authors: 
Anglingkusumo, Reza
Year of Publication: 
2005
Series/Report no.: 
Tinbergen Institute Discussion Paper 05-054/4
Abstract: 
In this paper the effect of excess narrow money (MI) on C PI intlation in Indonesiabefore, during, and after the Asian crisis is empirically examined. The standard model for themonetary analysis of inflation, i.e. the P-Star model by Hallman-Porter-Small (1991), isapplied and tested empirically using quarterly Indonesian data between 1981 and 2002. Theempirical model is a Markov switching error correction model. The results show that the tworegime P-star model, in terms of excess MI, tracks the long run dynamics of CPI inflation inIndonesia remarkably weIl. Hence, there is an empirical support for the assertion that longrun CPI intlation in Indonesia is a monetary phenomenon. In addition, there is evidence of aco-breaking relationship between excess MI and consumer prices in Indonesia during theAsian crisis.
Subjects: 
inflation
monetary model
structural break
regime switching error correction model
co-breaking
Asian crisis
Indonesia
JEL: 
E31
C12
Document Type: 
Working Paper

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