Explaining regional inflation programmes in Indonesia: Does inflation rate converge?
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Explaining regional inflation programmes in Indonesia: Does inflation rate converge? Rudi Purwono1 · Mohammad Zeqi Yasin1 · M. Khoerul Mubin1 Received: 29 August 2019 / Accepted: 2 January 2020 © Springer Science+Business Media, LLC, part of Springer Nature 2020
Abstract This paper investigates the inflation convergence of 82 Indonesian cities and discusses the remarkable regional inflation programmes in Indonesia. By employing a dynamic panel regression, the paper shows that Indonesia experienced an inflation convergence from 2013 to 2018. An intriguing finding is that the cities in Java-Bali, the largest density area, experienced a slower speed of convergence than that in cities outside the Java-Bali. This paper alleges that the development of logistic transportation and the formulation of an inflation control programme, such as the Tim Pengendalian Inflasi Daerah (TPID) or Regional Inflation Controlling Team (RICT) that has just been stationed and has commenced their duties in East Indonesia, might play an essential role in the convergence. Moreover, the coordination between the central and regional governments, represented by TPID/RICT, in implementing the effective policy (i.e. prioritising development outside Java-Bali and fostering interregion cooperation in the commodity supply chain) is effective in stabilising and reducing the inflation rate. Keywords Inflation · Convergence · Regional policy · Tim Pengendalian Inflasi Daerah (TPID) JEL Classification E31 · E69 · R13 · D63
* Mohammad Zeqi Yasin mohammad.zeqi‑[email protected] Rudi Purwono [email protected] M. Khoerul Mubin [email protected] 1
Faculty of Economics and Business, Universitas Airlangga, Jl. Airlangga No. 4–6, Gubeng, Surabaya 60115, Indonesia
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Economic Change and Restructuring
1 Introduction Inflation is a complex economic issue that has remained the main concern in the world for governments, policy makers, central bankers, as well as macroeconomists (Hussain and Malik 2011). Inflation also associates with various circumstances ranging from the national scale (such as economic stability) to the individual scale (such as social welfare). On the national or regional scale, inflation might pertain the price surge on the general price of goods and services in a country, so it makes the economy unstable. This price surge will impact people’s purchasing power, so that social welfare might be diminished. The large population of a country makes inflation more complicated to be tackled as in Indonesia, for instance. For a population that is more than 250 million (according to the 2010 Census) scattered in 35 provinces in 2019, there will be substantial distinguished traits of inflation experienced by each region. Each region can experience different production or distribution disruptions, so that the solution of these issues should be particularly uniquely distinguished. Furthermore, the cause of inflation also does not merely consist one aspect, for instance the inflation determinant that is not o
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