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Inflation Dynamics in Indonesia: Equilibrium Correction and Forward-Looking Phillips Curve Approaches

Gadjah Mada International Journal of Business (GamaIJB) · Vol. 12 No. 1 (2010) · pp. 117–133

DOI
10.22146/gamaijb.5515
ISSN
2338-7238, 1411-1128
Published
2010-01-12
Publisher
Master in Management, Faculty of Economics and Business, Universitas Gadjah Mada
Language
eng

Abstract

A series of relatively high inflation characterize Indonesian economy, especially during the economic crisis. Economists generally agree that high inflation is one of the major economic problems, and that economic authorities need to cope with such a problem. Therefore, it is essential to understand the behavior of inflation in Indonesia. The aim of this paper is to estimate the inflation dynamics in Indonesia using equilibrium correction and forward-looking Phillips Curve approaches. Previous empirical studies show that the equilibrium correction or backward-looking approach may explain the inflation dynamics in Indonesia. The backward-looking specification does not have to be the proper model even if the fact shows that the specification holds. The major innovation of this paper is the application of a forward-looking Phillips curve model. The empirical results—estimated using the Generalized Method of Moments (GMM)—show that the forward-looking Phillips Curve approach dominates the backward-looking behavior. It indicates that after a credible monetary policy announcement, for instance, the former model predicts that economic agents will change their behavior quickly. Therefore, the policy will affect the economy more rapidly

Keywords

Collaboration network of the authors

4 authors · 4 co-authorship links · 3 across different organisations

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  • Universitas Gadjah Mada
  • Boston University
  • Different organisations
  • Same organisation
  • Affiliation unknown
  • Thicker line = more joint articles · bigger circle = more articles
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Co-authorOrganisationJoint articles
Bernardinus Maria PurwantoUniversitas Gadjah Mada1
Rimawan PradiptyoUniversitas Gadjah Mada1

Affiliations come from OpenAlex; journal OAI-PMH metadata carries none. Authors without an OpenAlex ID are matched by name, which can merge or split people.

Metadata source: OAI-PMH (metadata jurnal) https://journal.ugm.ac.id/gamaijb/oai, first harvested 28 Okt 2026, last seen 1 Nov 2026.
Original metadata (oai_dc) 
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	<dc:title xml:lang="en-US">Inflation Dynamics in Indonesia: Equilibrium Correction and Forward-Looking Phillips Curve Approaches</dc:title>
	<dc:creator>Insukindro, Insukindro</dc:creator>
	<dc:creator>Sahadewo, Gumilang Aryo</dc:creator>
	<dc:subject xml:lang="en-US">correction; forward-looking; GMM; inflation; Phillips curve</dc:subject>
	<dc:description xml:lang="en-US">A series of relatively high inflation characterize Indonesian economy, especially during the economic crisis. Economists generally agree that high inflation is one of the major economic problems, and that economic authorities need to cope with such a problem. Therefore, it is essential to understand the behavior of inflation in Indonesia. The aim of this paper is to estimate the inflation dynamics in Indonesia using equilibrium correction and forward-looking Phillips Curve approaches. Previous empirical studies show that the equilibrium correction or backward-looking approach may explain the inflation dynamics in Indonesia. The backward-looking specification does not have to be the proper model even if the fact shows that the specification holds. The major innovation of this paper is the application of a forward-looking Phillips curve model. The empirical results—estimated using the Generalized Method of Moments (GMM)—show that the forward-looking Phillips Curve approach dominates the backward-looking behavior. It indicates that after a credible monetary policy announcement, for instance, the former model predicts that economic agents will change their behavior quickly. Therefore, the policy will affect the economy more rapidly</dc:description>
	<dc:publisher xml:lang="en-US">Master in Management, Faculty of Economics and Business, Universitas Gadjah Mada</dc:publisher>
	<dc:date>2010-01-12</dc:date>
	<dc:type>info:eu-repo/semantics/article</dc:type>
	<dc:type>info:eu-repo/semantics/publishedVersion</dc:type>
	<dc:type xml:lang="en-US">Peer-reviewed Article</dc:type>
	<dc:format>application/pdf</dc:format>
	<dc:identifier>https://journal.ugm.ac.id/gamaijb/article/view/5515</dc:identifier>
	<dc:identifier>10.22146/gamaijb.5515</dc:identifier>
	<dc:source xml:lang="en-US">Gadjah Mada International Journal of Business; Vol 12, No 1 (2010): January - April; 117 - 133</dc:source>
	<dc:source>2338-7238</dc:source>
	<dc:source>1411-1128</dc:source>
	<dc:language>eng</dc:language>
	<dc:relation>https://journal.ugm.ac.id/gamaijb/article/view/5515/4487</dc:relation>
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