The Impact of Monetary Policy Communication in an Emerging Economy: The Case of Indonesia
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Summary:
Since the adoption of the inflation targeting framework by Bank Indonesia (BI), monetary policy communication has played an increasingly important role in BI’s policy toolkit. This paper assesses BI’s monetary policy communication from three perspectives: i) its transparency and clarity, ii) its ability to align market expectation and BI’s policy decisions (predictability), and iii) its impact on financial markets. In particular, we assess the impact of BI’s monetary policy practices by focusing on its monetary policy press releases and monetary policy reports. The results show that Bank Indonesia has made significant progress in the transparency of its communication as well as in the institutional framework to support this. Nonetheless, the results also suggest ways in which the impact of communication can be further improved, including by strengthening the clarity of policy messages, its consistency with the policy framework and the depth of the money market.
Series:
Working Paper No. 2020/109
Subject:
Banking Central bank policy rate Communications in revenue administration Financial markets Financial services Monetary policy Monetary policy communication Monetary policy frameworks Money markets Revenue administration
English
Publication Date:
June 26, 2020
ISBN/ISSN:
9781513545646/1018-5941
Stock No:
WPIEA2020109
Pages:
29
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