order_209787 (1).docx - Running head 2013 CENTRAL BANK...

This preview shows page 1 - 4 out of 7 pages.

Running head: 2013 CENTRAL BANK MONETARY POLICY OF INDONESIA 1 2013 Central Bank Monetary Policy of Indonesia Student’s Name Institutional Affiliation
Image of page 1

Subscribe to view the full document.

2013 CENTRAL BANK MONETARY POLICY OF INDONESIA 2 2013 Central Bank Monetary Policy of Indonesia Monetary policy refers to a central bank’s policy relating to the regulation of the availability, cost, and use of credit and money with the assistance of monetary measures to realize particular objectives. It is an intentional effort by a nation's central bank to regulate the credit condition and money supply with the aim of achieving economic goals. The primary objective of Bank Indonesia (Indonesian Central Bank) is to maintain and achieve the stability of the rupiah, which is the steadiness of the prices of products and services revealed by inflation. Thus, the primary monetary policy objective of Bank Indonesia is to reduce inflation. Similarly, exchange rate plays a significant role in achieving financial system and price stability. Bank Indonesia relies on various instruments to achieve its monetary policy objectives. These include open market operation, setting a minimum reserve ratio, prescribing the discount rate, and regulating credit. Global Macroeconomic Indicators The global macroeconomic indicators that Indonesia considers before conducting the monetary policy include gross domestic product (GDP), unemployment, industrial production, public debt, and exchange rate. The GDP is an important indicator for gauging a country’s economy. In 2013, Indonesia’s economic growth was on a slowing trend because of various unfavorable conditions in the international economy. The country’s total GDP as a percentage of y-o-y in 2013 was 5.8 (Bank Indonesia, 2013). Weak export prices and high uncertainty led to significant reduction in investments, mainly for the non-construction investment. Similarly, the household consumption continued to be sizable because of the increasing population of the middle class in the country. Indonesia took the GDP into account before conducting its monetary
Image of page 2
2013 CENTRAL BANK MONETARY POLICY OF INDONESIA 3 policy because it provides information about the value of products and services produced in the country. Indonesia also considered the unemployment rate before carrying out its monetary policy. The level of unemployment denotes the percentage or ratio of the individuals classified as unemployed to the total labor force in a country. Indonesia registered an unemployment rate of 6.25% in 2013, which was above its 2010-2014 projected rate of 5.0-6.0 percent in 2014 (Bank Indonesia, n.d.). The level of unemployment is an important global macroeconomic indicator because it leads to loss of purchasing power, which often results in the unemployment of other
Image of page 3

Subscribe to view the full document.

Image of page 4
  • Spring '16
  • dennis

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern