Fiscal Policy’s Role in Stabilising the Economy in Indonesia

Abstract

This thesis examines the role played by fiscal policy within the Indonesian economy by analysing the long-term and short-term factors contributing to stabilisation of the economy from 1980 to 2014. The first part deals with examining the validity of Wagner’s Law in the presence of price dynamics. The second part measures the fiscal multipliers to clarify the role of fiscal policy within the context of a dynamic Structural Vector Auto Regression identified using sign restrictions.