IJEM International Journal of Economics and Management

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1 In. Journal of Economcs and Managemen 0(): 2 (206) IJEM Inernaonal Journal of Economcs and Managemen Journal homepage: hp:// In Search of Effecve Moneary Polcy n Indonesa: Inflaon Targeng or Mulple Objecves? SALSA DILLA *, NOER AZAM ACHSANI AND LUKYTAWATI ANGGRAENI Deparmen of Economcs, Faculy of Economcs and Managemen, Bogor Agrculural Unversy, Indonesa ABSTRACT In he las 0 years, many counres ha prevously adoped mulple arges sared o change her moneary polcy o a sngle arge ha s, an nflaon argeng framework (ITF), due o he urgency of conrollng prce level. Indonesa formally adoped ITF as s new moneary framework n So far, here s no clear concluson as o wheher or no he ITF framework s funconng well. Ths paper compares he effecveness of he wo polces he nflaon argeng framework (ITF) and mulple objecves usng wo dfferen moneary polcy nsrumens; ha s, money marke rae (MMR) and base money (M0). We employ a Srucural Vecor Auoregressve (SVAR) model for Indonesan daa from The resuls show ha he ITF s beer han mulple objecves. Thus, he Bank Indonesa polcy o mplemen ITF should be he rgh choce. However, our furher analyss showed ha he ITF usng moneary aggregaes (M0) as a polcy nsrumen s he mos suable moneary polcy framework. Therefore, we sugges ha he Indonesan Cenral Bank should re-evaluae s curren polcy, whch s ITF usng money marke rae (MMR) as a polcy nsrumen. JEL Code: E3, E42, E52, E58. Keywords: nflaon argeng, mulple objecves, moneary polcy nsrumen, SVAR. *Correspondng Auhor: E-mal: salsa.dlla@yahoo.com Any remanng errors or omssons res solely wh he auhor(s) of hs paper.

2 In. Journal of Economcs and Managemen 0(): 2 (206) INTRODUCTION Moneary polcy s one of he mos mporan aspecs n macroeconomcs. Accordng o Faas, Mnhov and Rose (2004), cenral banks have o use hree ypes of quanave moneary arges: exchange raes, money growh raes and nflaon arges. Fry (2000) argued ha a debae remans abou he approprae objecves of moneary polcy. On he one hand, a few cenral banks advocae ha moneary polcy can and should be argeed a employmen and economc growh n addon o prce sably (mulple objecves). On he oher hand, he more commonly held vew s ha moneary polcy should be dreced solely a prce sably (nflaon argeng). Sudes concernng he dfference beween mulple objecves and nflaon argeng have been conduced for several years. Mshra and Mshra (200) found ha he mplemenaon of mulple objecves n Inda creaed conflc beween exchange rae sablzaon and nflaon sablzaon. Hargreaves (2002) argued ha s no possble for moneary polcy o successfully acheve mulple arges because none of he arges wll be successfully acheved. Accordng o Pohan (2008), s dffcul o focus moneary polcy n Indonesa on reachng he fnal arge n he mulple objecves approach because here wll be a rade-off among he arges. In order o manan prce sably, many counres currenly apply he so-called Inflaon Targeng Framework (ITF) for her moneary polcy. Based on Vaslescu and Mungu-Pupâzan (200), nflaon argeng represens a sraegy of moneary polcy ha requres he cenral bank o esablsh a arge for he nflaon rae and o acheve usng moneary nsrumens, so ha prce sably s obaned. Ban and Laxon (2006) saed ha ITF s founded on a clear commmen o a quanave nflaon arge as he prmary objecve of moneary polcy, wh a hgh degree of ransparency and accounably n he formulaon and mplemenaon of polcy. Sudes concernng he mplemenaon of ITF have been conduced boh n developed counres and developng counres. Svensson (998) argues ha nflaon argeng ndcaes a sronger commmen o a sysemac and opmzng moneary polcy han oher moneary polcy regmes. Creel (2008) emprcally found ha he mplemenaon of ITF brngs some posve effecs n developed counres lke Canada, UK and Sweden. On he oher hand, Roger (2009) found ha ITF s more effecvely mplemened n hgh-ncome groups han n low-ncome groups. Accordng o Mshra and Mshra (200), Franca and Garca (2005), Torres and Sardaks (2007), Razm, Mohamed, Chn and Habbullah (205) and Yog (2008), he mplemenaon of ITF n emergng counres lke Inda, Mexco, Thaland and Indonesa shows an dencal moneary phenomenon where exchange raes sll play an mporan role n deermnng nflaon rae. Consequenly, he cenral banks end o conrol exchange rae (exchange rae argeng) raher han nflaon rae (nflaon argeng), whch s commonly known as fear of floang. Ths paper s devoed o sudyng hs ssue n Indonesa, one of he mos dynamc emergng markes n he world. Indonesa has been growng seady n he las few years. I s now he fourh larges economy n Eas Asa afer Chna, Japan and Souh Korea and he 5h larges economy n he world on a purchasng power pary (PPP) bass. Jonng G-20, Indonesa s Taken from he paper The Growh and Developmen of he Indonesan Economy by Sephen Elas and Clare Noone (20). 2

3 In. Journal of Economcs and Managemen 0(): 2 (206) consdered one of he mos promsng counres n he world. For hese reasons, Indonesa s economc ssues, ncludng he moneary polcy condon, are neresng o dscuss. Indonesa sared o adop he Inflaon Targeng Framework (ITF) n July 2005 as s new moneary polcy. In he frs 3 years of nflaon argeng regmes, n whch base money was used as he moneary polcy nsrumen, he performance was no sasfyng, and some aspecs such as governmen polcy and exchange rae volaly also affeced he nflaon rae. Based on some emprcal evdence provded by Bank Indonesa, nflaon argeng would be more effecve f only neres rae s used as he moneary polcy nsrumen (raher han base money). Ineres rae s consdered more effecve n sgnalng moneary polcy hrough he money marke. In realy, however, he moneary polcy nsrumen ransformaon no neres rae dd no resul n any changes affecng he performance of he nflaon argeng framework n Indonesa. Keepng hs developmen n mnd, s neresng o assess whch moneary polcy s suable for mplemenaon n Indonesa. The man purpose of hs paper s o deermne whch polcy could make an effcen ransmsson n Indonesa s moneary polcy. Ths paper wll be devoed o comparng he wo polces (mulple objecves and ITF) wh wo dfferen moneary polcy nsrumens (.e., money marke rae (MMR) and base money (M0)). The resuls of hs paper wll have mplcaons for macro and moneary economss, specfcally polcy makers n Indonesa (Bank Indonesa). The res of he paper wll be organzed as follows. Secon 2 wll explan he daa and research mehodology, followed by esmaon resuls n secon 3. A summary of he resuls, polcy mplcaons and suggesons for fuure research wll be provded n secon 4. RESEARCH METHODOLOGY Ths research s carred ou usng secondary monhly daa from Indonesa coverng he perod from 2005 January o 202 December. 2 The daa have been colleced from he CEIC, Inernaonal Fnancal Sasc (IFS), The Federal Reserve Bank of New York, Energy Informaon Admnsraon and Bank Indonesa. The calculaon process was done usng he sascal package Evews 6. Egh varables are chosen o explan he model and o denfy he moneary polcy shocks; hese conss of wo foregn varables and sx domesc varables. The foregn varables ncluded n he model are ol prce (Wes Texas Inermedae) and he federal funds rae (proxy for he nernaonal neres rae). The domesc varables ncluded n he model are hree non-polcy varables and hree polcy varables. The non-polcy varables are nflaon (measured by a rae of change n he Consumer Prce Index (CPI)), oupu (measured by ndusral producon ndex (IPI)) and exchange rae (as measured by real effecve exchange rae (REER)). Polcy varables are base money (M0) and money marke rae (MMR), whch are used as moneary polcy nsrumen (MPI), gross bank cred (GBC) and broad money aggregae (M2). 2 Ths perod s chosen o see he progress of nflaon argeng performance n Indonesa, snce he nflaon arge was se n 2000 bu ITF was formally legmaed from July

4 In. Journal of Economcs and Managemen 0(): 2 (206) Based on he non saonary es, he daa are saonary n he frs dfference. Because he daa n a VAR analyss mus be saoner n he level hs research uses VAR frs dfference, whch wll connue wh Srucural VAR analyss. The approprae lag lengh for he esmaed VAR has been decded on he basc of Akake s Informaon Creron (AIC). The number of lag ncluded n he VAR model s one. In hs paper, we adop he model of Mshra and Mshra (200) o denfy he mpac of moneary polcy nsrumen shocks n he mulple objecves scenaro s presened n Equaon (): e ol b e ffr ε ffr b 3 b e nf ε nf b 4 b 42 b e y m j ε y b 5 b 52 b 53 b e reer ε reer b 6 b 62 b 63 b 64 b e mp ε mp b 7 b 72 b 73 b 74 b 75 b 76 0 e gbc ε gbc b 8 b 82 b 83 b 84 b 85 b 86 b 86 e gbc ε gbc B e m ε ε ol The resrced Srucural Vecor Auoregressve (SVAR) model used o denfy he mpac of moneary polcy nsrumen shocks n he nflaon argeng scenaro s presened n Equaon (2): e ol b e ffr ε ffr b 3 b e nf ε nf b 4 b 42 b e y ε y m j b 5 b 52 b 53 b e reer ε reer b 6 b 62 b e mp ε mp b 7 b 72 b 73 b 74 b 75 b 76 0 e gbc ε gbc b 8 b 82 b 83 b 84 b 85 b 86 b 86 e gbc ε gbc B e m ε ε ol where : b j elemen of B, e j error erm from he orhogonal shocks (j ol prce (OIL), fed funds rae (FFR), nflaon (INF), oupu (Y), exchange raes (REER), moneary polcy nsrumen (MPI): base money (M0) or money marke rae (MMR), gross bank cred (GBC) and broad money (M2)), m j cholesky resrcons, ε j orhogonal vecor shocks. 4

5 In. Journal of Economcs and Managemen 0(): 2 (206) 5 The dfference beween he mulple ndcaor scenaro and nflaon argeng scenaro s n he moneary polcy nsrumen equaon. In he mulple ndcaor scenaro, he moneary polcy nsrumen has been se afer lookng a he curren value of nflaon, oupu and exchange raes, whle n he nflaon argeng scenaro only nflaon s allowed o ener he moneary polcy reacon funcon, as represened by he moneary polcy nsrumen equaon. The SVAR model specfcaon for he mulple objecves scenaro wh base money (M0) and money marke rae (MMR) as moneary polcy nsrumen s: The SVAR model specfcaon for he nflaon argeng scenaro wh base money (M0) and money marke rae (MMR) as moneary polcy nsrumen s: where: parameer n marks polnomal (fne order marx) wh lag- m varable analyss, ncludng: ol prce (OIL), federal funds rae (FFR), nflaon (INF), oupu (Y), exchange raes (REER), base money (GM0) or money marke rae (MMR), gross bank cred (GBC) dan broad money (GM2). ε GBC GM2 GM2 GBC ε - GM2 GBC GM0 INF FFR OIL m ε - GM2 GBC MMR INF FFR OIL m ε - - MMR REER Y INF FFR OIL m - - GM0 REER Y INF FFR OIL m

6 In. Journal of Economcs and Managemen 0(): 2 (206) COMPARISON BETWEEN THE PERFORMANCE OF MULTIPLE OBJECTIVES AND INFLATION TARGETING IN INDONESIA Comparson beween he performance of mulple objecves and nflaon argeng n Indonesa can be seen from he SVAR esmaon 3 whch presened n Table. Noes: Table SVAR Esmaon: Moneary Polcy Insrumen s Shock () (2) (3) (4) OIL FFR *** *** INF ** *** Y REER M *** *** - - MMR *** *** GBC M (): Moneary Polcy Insrumen Equaon for Mulple Objecves Scenaro: M0 as MPI (2): Moneary Polcy Insrumen Equaon for Inflaon Targeng Scenaro: M0 as MPI (3): Moneary Polcy Insrumen Equaon for Mulple Objecves Scenaro: MMR as MPI (4): Moneary Polcy Insrumen Equaon for Inflaon Targeng Scenaro: MMR as MPI 2. *** sgnfcan n %; ** sgnfcan n 5%; * sgnfcan n 0% The esmaon resuls show ha he performance of nflaon argeng, wheher base money (M0) or money marke rae (MMR) s used as he moneary polcy nsrumen, s more responsve n erms of he changes of macroeconomc varables han n he case of mulple objecves. Ths fac s suppored by he coeffcen n he moneary polcy nsrumen equaon, whch s hgher on he nflaon argeng compared o mulple objecves. The resuls ndcae a hgher or sharper moneary polcy response n he nflaon argeng scenaro. Bank Indonesa has greaer auonomy and freedom o respond o he shocks o reach he nflaon arge. One of he pre-condons ha mus be me before mplemenng nflaon argeng s he ndependence n decdng whch moneary polcy nsrumen wll be used by Bank Indonesa. The ransformaon from mulple arges o a sngle arge also became one of he reasons why Bank Indonesa s more focused on reachng he fnal arge. In concluson, can be nferred ha nflaon argeng s a beer choce for mplemenaon n Indonesa raher han mulple objecves. Ths fndng s n lne wh Mshra and Mshra (200), Hargreaves (2002) and Pohan (2008), who all agreed ha he mplemenaon of mulple objecves wll cause a rade-off among he arges. 3 The SVAR esmaon resuls for each model.e. nflaon argeng framework (ITF) and mulple objecves usng wo dfferen moneary polcy nsrumens,.e. money marke rae (MMR) and base money (M0) are presened n Appendx -4. 6

7 In. Journal of Economcs and Managemen 0(): 2 (206) The nex analyss would be smplfed by comparng he performance of nflaon argeng wh base money (M0) as he moneary polcy nsrumen and he performance of nflaon argeng wh money marke rae (MMR) as he moneary polcy nsrumen. From he esmaon, we can nfer ha nflaon s sgnfcanly nfluenced by base money (M0) bu s no sgnfcanly nfluenced by money marke rae (MMR). Surprsngly, nflaon s no nfluenced by he money marke rae varable, whch represens he moneary polcy nsrumen n Indonesa. If he money marke rae (MMR) as he moneary polcy nsrumen canno affec he fnal arge (nflaon arge), hen hs means ha here was no ye an effcen moneary polcy ransmsson n he ITF mplemenaon n Indonesa. Moreover, we can conclude ha he nflaon argeng scenaro wh base money (M0) as he moneary polcy nsrumen s he mos relevan polcy o be mplemened n Indonesa. Based on Sone (2003), many emergng marke counres are usng an nflaon arge o defne her moneary polcy framework bu are no able o manan he nflaon arge as he man polcy objecve. Indonesa was caegorzed as nflaon argeng le, where he Cenral Bank has relavely low credbly, a weak nsuonal framework and hgh vulnerably o economc shocks and fnancal nsably. Accordng o Achsan and Pur (2009), Indonesa experenced ncomplee pass-hrough on he neres rae, as he money marke rae was no ransmed compleely o he real secor. Indonesa had he slowes speed of adjusmen among he oher ASEAN3 counres n erm of he offcal neres rae owards depos raes and lendng raes. Ggneshvl (20) argued ha developed counres have a sronger pass-hrough n erm of he more sable fnancal srucure, where neres rae s consdered as a beer sgnal for moneary ransmsson. On he oher hand, for developng counres lke Indonesa, he pass-hrough coeffcens are mosly weak. Thus, moneary polcy ha depends on he neres rae pass-hrough, lke he nflaon argeng framework, canno be opmal for mplemenaon n a counry ha has a weak pass-hrough. Impulse Responses Funcon (IRF) and Forecas Error Varance Decomposon (FEVD) are used for he nex analyss. IRF s used o explan he response of base money (M0) shocks and money marke rae (MMR) shocks owards he macroeconomc varables n he nflaon argeng scenaro, whle FEVD s used o see he deermnans of macroeconomc varables owards nflaon, oupu and exchange rae varably n he nflaon argeng scenaro wh boh moneary polcy nsrumens. In general, IRF esmaon resuls show ha he nflaon varable gves he hghes response o he base money (M0) shocks compared o money marke (MMR) shocks. Smlarly, he oupu and exchange raes varables respond o base money (M0) shocks over a longer perod han money marke shocks (MMR). On he oher hand, he exchange rae varable gves he hghes response o money marke (MMR) shocks. The mporance of exchange raes ndcaes ha Bank Indonesa sll has o be focused on conrollng exchange raes o reach prce sably. Accordng o Roger and Sone (2005) nflaon argeng s founded on a clear commmen o a quanave nflaon arge as he prmary objecves of moneary polcy. Moreover, Bernanke and Mshkn (997) argued he nflaon argeng sraegy n mos cases sgnfcanly reduces he role of formal nermedae arges, such as exchange rae. By adopng ITF, 7

8 In. Journal of Economcs and Managemen 0(): 2 (206) exchange rae should no be made he man objecve o focus on raher han he nflaon rae self. Mshra and Mshra (200), Franca and Garca (2005) and Torres and Sardaks (2007) all agree ha he mplemenaon of ITF n developng counres, ncludng Indonesa, shows an dencal moneary phenomenon he so-called fear of floang where he Cenral Banks end o conrol he exchange rae raher han he nflaon rae. Source: daa processed wh Evews 6 Fgure The Dynamc Response of Macroeconomc Varables Towards Base Money Shocks n he Inflaon Targeng Scenaro The IRF resul for boh scenaros shows ha one-sandard-devaon shocks n he moneary polcy nsrumen wll be responded o by gross bank cred and broad money varables n he frs monh and by he oher varables n he second monh. Afer ha, a shock n base money wll be responded o by he nflaon varable unl he 24h monh and wll sar o converge a he 25h monh, whle a shock n money marke rae wll be respond o by he nflaon varable 8

9 In. Journal of Economcs and Managemen 0(): 2 (206) unl he 7h monh and sar o converge a he 8h monh. The IRF resul for he nflaon argeng scenaros wh base money (M0) and money marke rae (MMR) as moneary polcy nsrumen are presened n Fgure and Fgure 2, respecvely. Source: daa processed wh Evews 6 Fgure 2. The Dynamc Response of Macroeconomc Varables Towards Money Marke Rae Shocks n he Inflaon Targeng Scenaro 9

10 In. Journal of Economcs and Managemen 0(): 2 (206) Varance Decomposon of Inflaon Varance Decomposon of Oupu Varance Decomposon of Exchange Raes Fgure 3 Forecas Error Varance Decomposon for Inflaon Targeng wh Base Money as Moneary Polcy Insrumen 0

11 In. Journal of Economcs and Managemen 0(): 2 (206) Varance Decomposon of Inflaon Varance Decomposon of Oupu Varance Decomposon of Exchange Raes Fgure 4 Forecas Error Varance Decomposon for Inflaon Targeng wh Money Marke Rae as Moneary Polcy Insrumen

12 In. Journal of Economcs and Managemen 0(): 2 (206) The FEVD esmaon resuls n general show ha, n he nflaon argeng scenaro, base money (M0) plays an mporan role n explanng he movemens of nflaon, afer he nflaon varable self, where gves a greaer poron on explanng he nflaon varably raher han money marke rae (MMR). In spe of ha, money marke rae (MMR) made an mporan conrbuon o explanng he varably of oupu. On he oher hand, nflaon also plays an mporan role n explanng he movemens of exchange raes for ITF wh boh base money and money marke rae as he moneary polcy nsrumen. These fndngs srenghen he fac ha base money (M0) s a beer moneary polcy nsrumen n conrollng he nflaon rae. For furher nformaon, he FEVD esmaon resul s presened n Fgure 3 and 4. CONCLUSION The nflaon argeng scenaro has proven o be well mplemened n Indonesa n comparson o he mulple objecves scenaro. Inflaon s sgnfcanly nfluenced by base money (M0) bu s no sgnfcanly nfluenced by money marke rae (MMR). These fndngs show ha he nflaon argeng framework wh money marke rae (MMR) as moneary polcy nsrumen, whch s sll mplemened oday, has no been successful enough o creae an effcen moneary polcy ransmsson n reachng he fnal arge. Based on he SVAR esmaon resuls, he nflaon argeng scenaro usng base money (M0) as he moneary polcy nsrumen s preferable o be mplemened han he curren nflaon argeng framework. Ths means ha Bank Indonesa has o be more concerned wh conrollng he quany of base money raher han conrollng he money marke rae o mprove he effecveness of moneary polcy ransmsson. Modfyng Bank Indonesa s conssency n mplemenng he framework s also needed o mprove he performance of nflaon argeng. In lne wh he exchange rae polcy n parcular, emergng counres lke Indonesa formally adoped a floang exchange rae, bu n realy mos of hem wll no allow he exchange raes o freely move; n oher words, hey mplemen an exchange rae argeng raher han an nflaon argeng. The nex neresng area for fuure research would be o wden he scope of sudy by dong a comparson analyss n ASEAN6 abou he effecveness of he nflaon argeng performance n each counry, as well as a comparson beween he ITF counres and non-itf counres. REFERENCES Achsan N and Pur K. (2009), Respon Perbankan Terhadap Guncangan Suku Bunga Acuan d Negara ASEAN3, Jurnal Keuangan danperbankan, () : 6-74 (n Bahasa Indonesa). Ban N and Laxon D. (2006), Under Wha Condons Can Inflaon Targeng be Adoped?, The Experence of Emergng Marke, Cenral Bank of Chle Workng Paper. Bernanke B and Mshkn F. (997), Inflaon Targeng: A New Framework for Moneary Polcy?, The Journal of Economc Perspecves, Vol., No. 2 (Sprng, 997), pp

13 In. Journal of Economcs and Managemen 0(): 2 (206) Creel J and Huber P. (2008), Has he Adopon of Inflaon Targeng Represened a Regme Swch?, Emprcal evdence from Canada, Sweden and he UK. ESCP-EAP, France: OFCE. Elas S and Noone C. (20), The Growh and Developmen of he Indonesan Economy. Bullen of Reserve Bank of Ausrala, December Quarer 20. Faas A, Mhov I, Rose A. (2004), Quanave Goals for Moneary Polcy. Naonal Bureau of Economc Research Workng Papers: Franca M and Garca A. (2005), Reducng Inflaon Through Inflaon Targeng: The Mexcan Experence, Kel Insue for World Economcs Conference Volume on Moneary Polcy and Macroeconomc Sablzaon Workng Paper Fry M. (2000). Key Issues n he Choce of a Moneary Polcy Framework, Moneary Frameworks n a Global Conex, London: Rouledge. Ggneshvl N. (20), Deermnans of Ineres Rae Pass-Through: Do Macroeconomc Condons and Fnancal Marke Srucure Maer?, IMF Workng Paper /76. Hargreaves D. (2002), Is Feasble for Moneary Polcy o Pursue Economc Growh Targes, or Mulple Inflaon Targes?, Reserve Bank of New Zealand Polcy Targe Agreemen.. Mshra A. and Mshra V. (200), A VAR Model of Moneary Polcy andhypohecal Case of InflaonTargeng n Inda. Deparmen of Economcs Monash Unversy Dscusson Paper 5/0. Pohan A. (2008), Moneary Polcy Framework and Is Implemenaon n Indonesa, Jakara: PT Raja Grafndo Persada (n Bahasa Indonesa). Razm F, Mohamed A, Chn L, Habbullah M. (205), The Effec of Ol Prce and US Economy on Thaland s Macroeconomy: The Role of Moneary Transmsson Mechansm, Inernaonal Journal of Economcs and Managemen 9 (S): 2-4 (205). Roger S. (2009), Inflaon Targeng a 20: Achevemens and Challenge, IMF Workng Paper 09/236. Roger S and Sone M. (2005), On Targe? The Inernaonal Experence wh Achevng Inflaon Targes, Inernaonal Moneary Fund WP/05/63. Sone M. (2003), Inflaon Targeng Le, IMF Workng Paper: WP/03/2. Svensson L. (998), Inflaon Targeng as a Moneary Polcy Rule, Insue for Inernaonal Economc Sudes, Sockholm Unversy Semnar Paper No Torres R and Sardaks G. (2007), Inflaon Targeng n Emergng Economes: The case of Israel and Mexco, Deparmen of Economcs, Unversy of Warwck Uned Kngdom. Vaslescu M and Mungu-Pupâzan M. (200), Inflaon Targeng: Beween Theory and Realy. Annals of he Unversy of Peroşan, Economcs 0(3), 200, Yog. (2008). The Evaluaon of Inflaon Targeng Framework n Indonesa. Indonesa: Faculy of Economc and Managemen, Bogor Agrculural Unversy. 3

14 In. Journal of Economcs and Managemen 0(): 2 (206) Appendx Esmaed Srucural Conemporaneous Coeffcens n Mulple Objecves wh Base Money as MPI OIL FFR INF Y REER M0 GBC M2 OIL *** ( ) [ ] FFR * *** (0.7022) ( ) [.83254] [ ] INF *** (0.0553) (0.0070) ( ) [ ] [ ] [ ] Y *** ( ) ( ) ( ) ( ) [ ] [0.829] [ ] [ ] REER *** *** ( ) ( ) ( ) ( ) ( ) [ ] [.62298] [ ] [ ] [ ] M *** ** *** 0 0 ( ) ( ) ( ) (0.356) ( ) ( ) [ ] [ ] [ ] [ ] [ ] [ ]

15 In. Journal of Economcs and Managemen 0(): 2 (206) Appendx (Con.) GBC *** * *** 0.469*** *** 0 ( ) ( ) ( ) ( ) ( ) ( ) ( ) [ ] [ ] [ ] [ ] [ ] [ ] [ ] M *** *** *** ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] Noe: ( ) sandard errors; [ ] z-sascs *** sgnfcan n %; ** sgnfcan n 5%; * sgnfcan n 0% 5

16 In. Journal of Economcs and Managemen 0(): 2 (206) Appendx 2 Esmaed Srucural Conemporaneous Coeffcens n Inflaon Targeng wh Base Money as MPI OIL FFR INF Y REER M0 GBC M2 OIL *** ( ) [ ] FFR * *** (0.7022) ( ) [.83254] [ ] INF *** (0.0553) (0.0070) ( ) [ ] [ ] [ ] Y *** ( ) ( ) ( ) ( ) [ ] [0.829] [ ] [ ] REER *** *** ( ) ( ) ( ) ( ) ( ) [ ] [.62298] [ ] [ ] [ ] M *** *** *** 0 0 ( ) ( ) ( ) ( ) [ ] [3.6755] [ ] [ ]

17 In. Journal of Economcs and Managemen 0(): 2 (206) Appendx 2 (Con.) GBC *** 0.494* * *** 0.469*** *** 0 (0.0377) ( ) ( ) ( ) ( ) ( ) ( ) [ ] [ ] [ ] [ ] [ ] [ ] [ ] M *** *** *** ( ) ( ) (0.4433) ( ) ( ) ( ) ( ) ( ) [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] Noe: ( ) sandard errors; [ ] z-sascs *** sgnfcan n %; ** sgnfcan n 5%; * sgnfcan n 0% 7

18 In. Journal of Economcs and Managemen 0(): 2 (206) Appendx 3 Esmaed Srucural Conemporaneous Coeffcens n Mulple Objecves wh Money Marke Rae as MPI OIL FFR INF Y REER MMR GBC M2 OIL *** ( ) [ ] FFR * *** ( ) ( ) [0.0676] [ ] INF *** (0.0586) ( ) ( ) [ ] [0.5309] [ ] Y *** ( ) ( ) ( ) ( ) [ ] [ ] [ ] [ ] REER *.3083*** *** ( ) ( ) ( ) ( ) ( ) [ ] [.68535] [ ] [ ] [ ] MMR *** 0 0 ( ) ( ) ( ) ( ) ( ) [ ] [ ] [.55282] [ ] [ ]

19 In. Journal of Economcs and Managemen 0(): 2 (206) Appendx 3 (Con. ) GBC * ** *** 0 ( ) ( ) (0.6467) ( ) (0.0650) ( ) ( ) [ ] [ ] [ ] [ ] [ ] [-.2498] [ ] M *** *** *** ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] Noe: ( ) sandard errors; [ ] z-sascs *** sgnfcan n %; ** sgnfcan n 5%; * sgnfcan n 0% 9

20 In. Journal of Economcs and Managemen 0(): 2 (206) Appendx 4 Esmaed Srucural Conemporaneous Coeffcens n Inflaon Targeng wh Money Marke Rae as MPI OIL FFR INF Y REER MMR GBC M2 OIL *** ( ) [ ] FFR * *** ( ) ( ) [0.0676] [ ] INF *** (0.0586) ( ) ( ) [ ] [0.5309] [ ] Y *** ( ) ( ) ( ) ( ) [ ] [ ] [ ] [ ] REER *.3083*** *** ( ) ( ) ( ) ( ) ( ) [ ] [.68535] [ ] [ ] [ ] MMR *** 0 0 ( ) (0.6838) ( ) ( ) [ ] [ ] [ ] [ ]

21 In. Journal of Economcs and Managemen 0(): 2 (206) Appendx 4 (Con. ) GBC * ** *** 0 ( ) ( ) ( ) ( ) ( ) (0.0069) ( ) [ ] [ ] [ ] [ ] [ ] [ ] [ ] M *** *** *** ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] Noe: ( ) sandard errors; [ ] z-sascs *** sgnfcan n %; ** sgnfcan n 5%; * sgnfcan n 0% 2