Money and the Exchange Rate under Monetary Stabilisation: The Case of Indonesia, 1971-1992

Abstract

The general objective of this study was to assess empirically the causal links and transmission processes between key macroeconomic variables described by a simple open monetary model, particularly, to see the movements of foreign reserves, exchange rates, prices, real output and government revenue and expenditure for Indonesia from 1971 to 1992. A monetary model of an open economy based on the monetary approach to the balance of payments has been used with the starting point of the disequilibrium condition in the money market.