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Mangasa Augustinus Sipahutar
Institut Bisnis dan Informatika Kesatuan Bogor, IPB University

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Negative Expected Inflation–Evidence From Indonesi Mangasa Augustinus Sipahutar
Jurnal Ekonomi dan Pembangunan Vol. 29 No. 1 (2021): Jurnal Ekonomi dan Pembangunan
Publisher : BRIN Publishing (Penerbit BRIN)

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.14203/JEP.29.1.2021.17-26

Abstract

  This study is about the Phillips curve in Indonesia from 1990 to 2019 using a VAR model to find out whether there is a stable tradeoff a strictly negative relationship between inflation and unemployment in the shortrun, and whether the coefficient of expected inflation is positive. This study found that there is negative expected inflation, meaning that the relationship between inflation and unemployment is not strictly downward sloping in the short run. Negative expected inflation will face difficulties to Bank of Indonesia (BI) in managing interest rate stemmed from economic shocks. Monetary contraction will decrease output and increase both unemployment and inflation, but monetary expansion does not result in meaningful output growth. Monetary expansion should be maintained at a longer period to increase output and purchasing power so that the expected inflation will become dynamically positive as modified Phillips curve suggested
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