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The Impact of Monetary Policy Communication in an Emerging Economy: The Case of Indonesia
Author:
Mr. Calixte Ahokpossi
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,
Agnes Isnawangsih
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,
Md. Shah Naoajnull

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, and
Ting Yannull

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Series:
IMF Working Papers
Volume/Issue:
Volume 2020: Issue 109
Language:
English
Publication Date:
26 Jun 2020
DOI:
https://doi.org/10.5089/9781513545646.001
ISBN:
9781513545646
ISSN:
1018-5941
Pages:
29
Keywords:
WP; monetary policy; rate surprise; BI issues monetary policy review; market rate; money market; report dummy; exchange rate; Monetary policy communication; Communications in revenue administration; Central bank policy rate; Monetary policy frameworks; Money markets; Global; central bank communication; central bank predictability; monetary policy report; monetary policy decision; monetary policy press releases; monetary policy surprise; monetary policy rate surprise; monetary policy report dummy; monetary policy objective
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2020: Issue 109