Lessons learned From Indonesia : Make synergy fiscal and monetary policy for poverty reduction Ima Amaliah, Tasya Aspiranti, Westi Riani
Universitas Islam Bandung
Abstract
This research aims to study the synergy role of monetary and fiscal policy in reducing Indonesia
poverty rate. Theoretical analysis and testing model are developed for the case of Indonesia using
1990-2018 annual data published by the Central Statistics Agency, Bank Indonesia and the Ministry
of Finance to show that reducing poverty simultaneously is closely correlated with the synergy of
monetary and fiscal policies. We find that poverty is simultaneously influenced by economic growth,
money supply and inflation. While foreign direct investment (FDI) has no statistically significant
influence on poverty at a 5% confidence level. It indicates that poverty can be reduced by increasing
economic growth, stabilizing money supply growth as an instrument, covering budget deficit by
monetary and fiscal policy, and supporting the investment activities. In contrast, as a way for
optimizing tax revenue, reducing tax rates by fiscal policy can be counterproductive to the efforts of
the central bank to create price stability. Foreign direct investment as an external source of funding
the provision of physical infrastructure is emerged to do for accelerating the resources exchange
across region to the mobility of resources across regions
Keywords: Poverty, Coordination of Policies, Fiscal, Monetary, Economic Growth, FDI
