Abstract
Current main problem in Indonesian economy is a surge in capital inflows. Capital inflows have made several policy dilemmas for Indonesian policy makers. This study covers several issues related with capital inflows in Indonesia: the fact about capital inflows, the causes and impact of capital inflows to Indonesian economy and policy responses. Descriptive analysis and econometric tools such as Ordinary Least Square and Vector Auto-regression (VAR) are used to answer several questions regarding the causes and impact of capital inflows to Indonesian economy. VAR result showed the significance of foreign interest rate that pushed the capital inflow to Indonesia. On the other hand, simple OLS results showed the evidence of sterilization as policy response to face a surge in capital inflows. Finally this study is aimed to give future policy recommendation in facing a surge in capital inflows.
| Original language | English |
|---|---|
| Pages (from-to) | 127-146 |
| Number of pages | 20 |
| Journal | European Journal of Economics, Finance and Administrative Sciences |
| Issue number | 52 |
| Publication status | Published - 2012 |
Keywords
- CapitalInflow
- Policy responses
- Sterilization policy
- Vector Auto-regression (VAR)