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Did Monetary Policy Stabilize Inflation during the COVID-19 Pandemic? Evidence from Indonesia

Efficient: Indonesian Journal of Development Economics · Vol. 9 No. 2 (2026) · pp. 131–141

DOI
10.15294/efficient.v9i2.42552
ISSN
2655-318X, 2655-6197
Published
2026-06-01
Publisher
Universitas Negeri Semarang
Language
eng

Abstract

This study examines the relationship between monetary policy and inflation in Indonesia during the COVID-19 period, from March 2020 to June 2023, over the short and long term. It focuses on how interest rates, money supply, and exchange rates influence inflation and identifies which factor is most effective. Using Indonesian monthly time-series data, the analysis employs econometric methods, including an error correction model, to assess stationarity, long-term relationships, and cointegration. The results show that the exchange rate is the most influential driver of inflation in both the short and long run, while interest rate policy is less effective, especially during crises. These findings challenge the conventional view that interest rate adjustments alone can stabilize inflation, emphasizing the critical role of exchange rate management. The study also finds that changes in the exchange rate begin to affect inflation within five periods, indicating a rapid short-term transmission. Overall, this research underscores the importance of coordinated monetary and exchange rate policies to maintain price stability and economic resilience in Indonesia, especially during crises.

Keywords

Collaboration network of the authors

19 authors · 44 co-authorship links

Hover or tap a name to highlight its co-authors. Double-click to open the author's page.

  • State University of Semarang
  • Diponegoro University
  • Affiliation unknown
  • Different organisations
  • Same organisation
  • Affiliation unknown
  • Thicker line = more joint articles · bigger circle = more articles
Show as table
Co-authorOrganisationJoint articles
Sucihatiningsih Dian Wisika PrajantiState University of Semarang2
Fauzul AdzimAffiliation unknown2
Sepandil Laras LaseAffiliation unknown2
Deni SunaryoAffiliation unknown2
Caroline CarolineAffiliation unknown1
Ceasilia SrimindartiAffiliation unknown1
Dzikrina Almas KusumadewiAffiliation unknown1
Yuki Mahardhito Adhitya WardhanaAffiliation unknown1
Dwi Nowo MartonocAffiliation unknown1
Elvina PrimayesaAffiliation unknown1
Muhammad Iqbal Al-Banna IsmailAffiliation unknown1
Siti PuryandaniDiponegoro University1
Hersugondo HersugondoAffiliation unknown1
Untung RahardjaAffiliation unknown1
Rossanto Dwi HandoyoAffiliation unknown1
Wandah WibawantoAffiliation unknown1

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.unnes.ac.id/journals/efficient/oai, first harvested 5 Nov 2026, last seen 5 Nov 2026.
Original metadata (oai_dc) 
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	<dc:title xml:lang="en">Did Monetary Policy Stabilize Inflation during the COVID-19 Pandemic? Evidence from Indonesia</dc:title>
	<dc:creator xml:lang="en">Hudaya, Afaqa</dc:creator>
	<dc:creator xml:lang="en">Zulfahmi</dc:creator>
	<dc:creator xml:lang="en">Etty Puji Lestari</dc:creator>
	<dc:subject xml:lang="en">Inflation</dc:subject>
	<dc:subject xml:lang="en">Money Supply</dc:subject>
	<dc:subject xml:lang="en">Interest Rate</dc:subject>
	<dc:subject xml:lang="en">Exchange Rate</dc:subject>
	<dc:subject xml:lang="en">Error Correction Model</dc:subject>
	<dc:description xml:lang="en">This study examines the relationship between monetary policy and inflation in Indonesia during the COVID-19 period, from March 2020 to June 2023, over the short and long term. It focuses on how interest rates, money supply, and exchange rates influence inflation and identifies which factor is most effective. Using Indonesian monthly time-series data, the analysis employs econometric methods, including an error correction model, to assess stationarity, long-term relationships, and cointegration. The results show that the exchange rate is the most influential driver of inflation in both the short and long run, while interest rate policy is less effective, especially during crises. These findings challenge the conventional view that interest rate adjustments alone can stabilize inflation, emphasizing the critical role of exchange rate management. The study also finds that changes in the exchange rate begin to affect inflation within five periods, indicating a rapid short-term transmission. Overall, this research underscores the importance of coordinated monetary and exchange rate policies to maintain price stability and economic resilience in Indonesia, especially during crises.</dc:description>
	<dc:publisher xml:lang="en">Universitas Negeri Semarang</dc:publisher>
	<dc:date>2026-06-01</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">Peer-reviewed Article</dc:type>
	<dc:format>application/pdf</dc:format>
	<dc:identifier>https://journal.unnes.ac.id/journals/efficient/article/view/42552</dc:identifier>
	<dc:identifier>10.15294/efficient.v9i2.42552</dc:identifier>
	<dc:source xml:lang="en">Efficient: Indonesian Journal of Development Economics; Vol. 9 No. 2 (2026); 131-141</dc:source>
	<dc:source>2655-318X</dc:source>
	<dc:source>2655-6197</dc:source>
	<dc:source>10.15294/efficient.v9i2</dc:source>
	<dc:language>eng</dc:language>
	<dc:relation>https://journal.unnes.ac.id/journals/efficient/article/view/42552/9971</dc:relation>
	<dc:rights xml:lang="en">Copyright (c) 2026 Efficient: Indonesian Journal of Development Economics</dc:rights>
</oai_dc:dc>