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Vol. 22 No. 2 (2024): Jurnal Ekonomi Pembangunan
Submitted
May 23, 2024
Accepted
October 31, 2024
Published
November 30, 2024
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Abstract

Triple challenges are conditions where economic growth is low, interest rates are high, and inflation is elevated. These conditions precede a recession in economic growth, which potentially leads to a high inflation rate. This study identifies threshold values of monetary and fiscal policy as well as an effect on inflation in Indonesia. The threshold regression method was used with time series data spanning from 2013Q1 to 2023Q2. The finding showed that the monetary policy was lower than the threshold of 6.375%, indicated exchange and interest rates had a significant effect on inflation. Exceeding the threshold, there was no significant relationship between interest rates and inflation, but the exchange rate and inflation had a significant and negative correlation on inflation. The fiscal policy was lower than the threshold of IDR.18 trillion suggested for inflation, while the output gap and the budget deficit had a positive and significant effect on inflation. On the other hand, exceeding the threshold, inflation was significantly affected by the output gap and budget deficit. To control inflation and achieve economic stability, it is necessary to synergize monetary and fiscal policy carried out effectively and efficiently as well as integrated.

Keywords

Inflation Fiscal policy Monetary policy Threshold

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How to Cite
Dana, B. S., & Musaiyaroh, A. (2024). Threshold Effect of Monetary and Fiscal Policy on Inflation in Indonesia. Jurnal Ekonomi Pembangunan, 22(2), 157–170. https://doi.org/10.29259/jep.v22i2.23131
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