POSSIBLE IMPACT OF THE ABE-KURO MONETARY EXPANSION ON THE INDONESIAN ECONOMY

Authors

  • Yoopi Abimanyu Pusat Kebijakan Ekonomi Makro, Badan Kebijakan Fiskal, Kementerian Keuangan

DOI:

https://doi.org/10.31685/kek.v17i2.10

Keywords:

abenomics, capital account, expansion monetary policy, short-run qualitative impact

Abstract

Abenomics, the economic policies of Japan, which recently has been changed into "Abe-Kuro" referring to the Prime Minister and the Governor of the Central Bank, consists of monetary policy, fiscal policy and growth package. It is meant to resolve Japan's low economic growth and deflation. This short note is trying to see the impact of one of the policies, which is the expansion monetary policy, on the Indonesian economy, in particular on the exchange rate and the balance of payments. The hypothesis of this note is that, even though the Indonesian exchange rate will be appreciated, the impact on the capital account is somewhat more significant relative to the current account. On the current account and capital account, the impact of the monetary expansion policy is more on the capital account, particularly the shortterm portfolio movement relative to the current account. Assuming that the United States will stop her monetary expansion policy, the Japan monetary expansion would substitute the United States policy. On the other hand, if the United States monetary expansion policy would be continued, then the Japan monetary expansion policy would supplement the United States policy. In both cases, the Rupiah exchange rate would be appreciated.Abenomics, the economic policies of Japan, which recently has been changed into "Abe-Kuro"
referring to the Prime Minister and the Governor of the Central Bank, consists of monetary policy, fiscal
policy and growth package. It is meant to resolve Japan's low economic growth and deflation. This short
note is trying to see the impact of one of the policies, which is the expansion monetary policy, on the
Indonesian economy, in particular on the exchange rate and the balance of payments. The hypothesis of
this note is that, even though the Indonesian exchange rate will be appreciated, the impact on the capital
account is somewhat more significant relative to the current account. On the current account and capital
account, the impact of the monetary expansion policy is more on the capital account, particularly the shortterm
portfolio movement relative to the current account. Assuming that the United States will stop her
monetary expansion policy, the Japan monetary expansion would substitute the United States policy. On
the other hand, if the United States monetary expansion policy would be continued, then the Japan
monetary expansion policy would supplement the United States policy. In both cases, the Rupiah exchange
rate would be appreciated.

References

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Comprehensive? International Monetary Fund Working Paper. Washington DC.

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Macroeconomics. 2nd ed. Macmillan Publishing Co.

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Uribez, Martin. (2012). Lectures in Open Economy Macroeconomics. The University of Columbia. USA.

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Published

2015-11-09

Issue

Vol. 17 No. 2 (2013)

Section

Articles

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