Fiscal and Monetary Policy Mix in the Indonesian Economy: A Theoretical Review
DOI:
https://doi.org/10.55927/ijems.v4i3.57Keywords:
Macroeconomics, Fiscal Policy, Monetary PolicyAbstract
Economic development aims to achieve sustainable growth accompanied by price stability, employment opportunities, and equitable income distribution. However, economies, including Indonesia’s, remain vulnerable to economic fluctuations that may lead to unemployment, inflation, low economic growth, and balance of payments disequilibrium. Fiscal and monetary policies are widely used to manage aggregate demand and maintain macroeconomic stability. Fiscal policy influences government expenditure and taxation, while monetary policy regulates money supply and interest rates. Within the IS-LM framework, fiscal policy shifts the IS curve, whereas monetary policy shifts the LM curve. The combination of expansionary fiscal policy and contractionary monetary policy may increase national income and interest rates, particularly under a fixed exchange rate regime. Furthermore, socio-political and security stability are important in supporting investment and economic certainty
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