Title:
EFFECTIVENESS OF MONETARY TRANSMISSION MECHANISM OF INTEREST TRANSMISSION POLICY: Investigation of NAIRU (Non-accelerating Inflation Rate of Unemployment) as an Alternative Target of Monetary Policy in Indonesia 2006-2019

Authors:
Nur Aufa Fitriana, Ghozali Maski, Indonesia

Abstract:

The purpose of this research is to conduct an analysis of NAIRU (Non-Accelerating Inflation Rate of Unemployment) as an alternative monetary policy target with a study on the mechanism of monetary policy transmission in the interest rate pathway in Indonesia. This type of research is applied research so that the data used are secondary data with several variables from macroeconomic and monetary variables. The method used in this study is the first to estimate NAIRU using the Ball-Mankiw approach and to estimate the relationship between NAIRU and Inflation using VECM. The results of this study indicate that in the mechanism of monetary policy transmission of the interest rate path when using alternative NAIRU objectives, it is evident that Inflation and NAIRU have a tradeoff in both the short and long term.