Abstract
The changing global economic cycle may affect the Indonesia inflation, such as world oil prices and Fed Funds Rate. This research aims at analyzing the direct or indirect effects that cause the changes in the world oil prices and the Fed Funds Rate to the volatility of inflation in Indonesia. The analytical tool used in this research is path analysis. The research results is a significant direct effect of the world oil price variable on the inflation, there is a significant direct effect of the Fed Funds Rate variable on the inflation, and there is a significant direct effect of the Bank Indonesia (BI) variable on the inflation. The variable of the amount of money in circulation has no significant direct effect on the Indonesia inflation, there is a significant direct effect of the variables of the world oil prices and the Fed Funds Rate on the money in circulation, and there is a significant direct effect of the Fed Funds Rate variable on the money in circulation. There is a significant direct effect of the world oil price variable on the BI rate, and there is significant direct effect of the Fed Funds Rate variable on the BI rate.
Highlights
2011 where the Bank Indonesia (BI) rate has decreasedThe Indonesian economy is inseparable from the changing pattern of the global economic cycle
The changing pattern of the global economic cycle may affect the performance of the domestic economy through the trade path and through the financial market path, such as the world oil prices and the Fed Funds Rate
The monetary policy framework Bank Indonesia is operationally reflected by the determination of the BI rate because BI rate as a reference is expected to affect the inflation
Summary
The Indonesian economy is inseparable from the changing pattern of the global economic cycle. The changing pattern of the global economic cycle may affect the performance of the domestic economy through the trade path and through the financial market path, such as the world oil prices and the Fed Funds Rate. The main objective of Bank Indonesia is to achieve and maintain the stability of Rupiah value, in accordance with the Acts no. 3 of 2004 Article 7 concerning Bank Indonesia To achieve this objective, Bank Indonesia in July 2005 has fully adopted the Inflation Targeting Framework (ITF) as a monetary policy framework with an inflation target as the main target. The monetary policy adopted by Bank Indonesia must be in accordance with the global and regional economic conditions. The time when the economy is in a booming state will be different from the depressed condition
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