Comment on ‘toward improved monetary policy in Indonesia’
[Conclusion]: What really matters in the case of Indonesia is whether base money is the real story behind the inflation process. Here, it is worth making just two observations on the evidence presented in the article. First, it is not enough to say that inflation is caused by base money growth just because growth of base money leads inflation (McLeod’s Figure 3) and interest rates do not (McLeod’s Figure 5). McLeod’s argument confuses correlation with causation. For example, an alternative...[Show more]
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