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Journal : Journal of Community Dedication

THE EFFECT OF MONETARY POLICY ON ECONOMIC STABILITY IN INDONESIA: A LITERATURE REVIEW Yogi Nurfauzi; Sunanto; Erna Handayani; Al-Amin
JOURNAL OF COMMUNITY DEDICATION Vol. 4 No. 3 (2024): AGUSTUS
Publisher : CV. ADIBA AISHA AMIRA

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Abstract

Monetary policy plays a vital role in ensuring the stability of the economic system in Indonesia, where Bank Indonesia as the monetary authority has the main responsibility in setting interest rates and controlling the amount of money in circulation. The determination of interest rates by Bank Indonesia has a direct impact on consumption and investment activities. A decrease in interest rates generally encourages an increase in consumption and investment, which in turn can boost economic growth. However, interest rates that are too low over a long period of time may increase the risk of excessive inflation and financial system instability, as they may encourage excessive risk-taking by financial institutions and economic actors. Conversely, an overly tight monetary policy, with high interest rates, can hamper economic growth and increase unemployment, as high borrowing costs reduce consumption and investment spending. Firms may experience difficulties in financing operations and expansion, while consumers will be more cautious in their spending and investment. Therefore, it is important for Bank Indonesia to implement a balanced and flexible monetary policy, which is responsive to current economic conditions and various economic indicators. This balance in monetary policy is needed to ensure price stability, sustainable economic growth, and public welfare. Effective regulation and strict enforcement of supervision are also key in avoiding the negative impact of monetary policy that is either too loose or too tight. In conclusion, appropriate and measured monetary policy is an important instrument to achieve sustainable and inclusive stability of the Indonesian economic system.
Co-Authors Achmad Kusyairi Adellia Suhermanto Afib Rulyansah Afifuddin, Moch. Anang Agus Wahyudi Ahmad Fathoni Aziz Ainul Yaqin Salam Ainur Rohmah Akhwani Al Putri Oktavia Al-Amin Alfi Wahyuningati Almaniar, Siska Alwin Widhiyanto Anggi Meryani Indiyanti Anlianna Annahdliya Aulia Zahwa Arif Puji Darmawan Ariska Praptiningtiyas Azwar Budhy Darmawan , Dwikie Chusnul Khotimah Cindy Fiola Cesarria Dewi Widiana Rahayu Dewi Widiyana Rahayu DIDIK PURWANTO Eka Rizki Meiwinda Endang Verawati Erna Handayani Fadil Hasan Fadlillah, Nuzul Imam Fatmawati, Adela Febriyani, Rafika Fery Hendy Hermawan Firdaus, Anisa Handayani, Erna hanifah, iis Hasibuan, Rahmawaty Hidayah Apriani Huda, Muchamad Samsul Imam Sugeng Santoso Indah Fitriyani Isrotin, Ayu Januar Al Amin Kaharani, Chanesya Farah Kasmad Kusuma, Rendra Sakbana Leni Sabrina Lestari Wulandari, Putri Lucyana Machmudah Mariati, Pance Mohamad Salik Mualfah, Desti Nafiah Nanang Rokhman Saleh Nanda Alifia Navi Mayyoulanda NUR FAUZIAH Nur Hamim Nur Rahmat, Nafolion Pance Mariati Pangripto Pramudantoro, Triaji Prihatin, Ananda Rahmad Firdaus Rahmawaty Hasibuan RATNA ZULVITA, DEBBY Rivaldi, Hardi Rizka Yunita Romlah Nur Asih Rosita Rudi Umar Susanto Saifudin Sakbana Kusuma, Rendra Sasmita, Febriarsita Eka Septin Purwanti Shally Rizkiyanti Sholihah, Maidatus Siti Muzdalifah Sri Hartatik Sri Murda Niati SURYANTI Syamsul Ghufron Syerina Raihatul Jannah Tika Handayani Tutik Ekasari Waliah Nur Rahayu Wasiaturrohmah, Annisa Willy Wijayanti Wiryanto Wulan Yogi Nurfauzi Zaviti, Erlinda De Lou