New method to calculate inflation called for<\/p>\n
JAKARTA (JP): The government should change its monthly-based
\ncalculation of inflation to a yearly-based method in order to
\nbetter reflect the state of Indonesia's economy, a University of
\nIndonesia economist has recommended.<\/p>\n
\"In calculating inflation, the government uses a method that
\nis not commonly used in other countries. It is not consistent
\nwith the system for calculating other indicators,\" economist
\nFaisal Basri told a seminar on interest rate policy, organized by
\nthe Center for Information and Development Studies on Friday.<\/p>\n
Faisal said that calculations of economic indicators, such as
\ninflation, are usually done on an annual basis. Export growth in
\nOctober 1995, for example, was calculated by comparing it with
\nthat of October 1994. He recommended that inflation for October
\n1995 should also be calculated by comparing the consumer price
\nindex for that month with the same month in 1994.<\/p>\n
\"But in fact, the government calculates inflation by comparing
\nthe consumer price index in October 1995 with that of the
\nprevious month in the same year,\" he said in his paper, Political
\nEconomy of Interest Rates and Inflation.<\/p>\n
Using the present monthly system of calculation, the
\ngovernment measured a 5 percent inflation rate during the January
\nto September period. Using the system suggested by Faisal,
\ninflation would have been recorded as 8.3 percent.<\/p>\n
While acknowledging that every system of calculation has
\nstrengths and weaknesses, Faisal noted that the yearly system of
\ncalculation would better reflect and had greater relevance to the
\nIndonesian economic condition.<\/p>\n
The monthly-based method of inflation measurement encourages
\nthe government to take a more short-term and pragmatic approach
\ntowards controlling prices, he said. The government's inflation
\nmanagement steps would also tend to involve direct market
\noperation or strong restrictions.<\/p>\n
He said that inflation also appears to have its own economic
\ncycle. Prices tend to increase in the lead up to the Idul Fitri,
\nChristmas and New Year holidays and to decrease in the months
\nafter these holidays.<\/p>\n
\"By applying the yearly system, we can minimize the consumer
\nprice index fluctuation because we compare two periods that are
\nsimilar in characteristics,\" he said.<\/p>\n
He said the inflation rate is furthermore one of several
\nfigures used as a yardstick for decisions about wage increases,
\nbut that such changes usually take more than a year.<\/p>\n
Faisal also predicted in his paper that inflation will be much
\nlower this year than it has been in recent years.<\/p>\n
Central Bureau of Statistics Chairman Sugito Suwito forecast
\nlast week that this year's inflation will be between 6 to 7
\npercent.<\/p>\n
But Faisal said: \"We need to review the achievement of
\nlowering the inflation. It may possibly result from an economic
\nslump rather than from a comprehensive policy. It seems we have
\nno comprehensive policy for eliminating the causes of high
\ninflation.\" (bnt)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/new-method-to-calculate-inflation-called-for-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}