Date Added: Dec 2010
Lax monetary policy in the United States has been pointed out as one of the responsible factors behind the recent global crisis. Similar loose monetary conditions also prevailed in many European countries before the crisis and were argued to be among the accommodating factors behind the run-up in asset prices that helped trigger the 2007 financial market turmoil. Did a similar situation also prevail in Asia? This paper provides an insight by specifically looking at developments in the conduct of monetary policy in Indonesia during the first decade of this century. It uses an estimated monetary policy rule to provide a benchmark for assessing the actual conduct of the country's monetary policy.