Islamic Monetary Policy and Macroeconomic Stability: Inflation and Exchange Rate Control in Indonesia

Abstract

Purpose – This research focuses on Islamic monetary policy as an alternative instrument in achieving macroeconomic stability in Indonesia. This study highlights the mechanism of controlling inflation and exchange rates through an approach based on sharia principles.

Methodology – The research methodology used in the research is descriptive-analytical. Meanwhile, considering that the nature and object of the problem in this study are mostly related to historical data and thought, the data analysis method used uses more linguistic, philosophical and historical approaches.

Findings – In aggregate, the results of the study show that the money supply as a representation of monetary policy, as well as macroeconomic stability, has an influence on the inflation rate and exchange rate in Indonesia. These findings indicate that monetary policy and national macroeconomic conditions play an important role in maintaining price balance and rupiah exchange rate stability. However, the results of the partial analysis show that not all variables representing monetary policy and macroeconomic stability have a significant influence on inflation in Indonesia.

Implication – It indicates that there are other factors outside of monetary policy, such as global economic turmoil and others. This underscores the need for strong coordination between monetary and fiscal policies, as well as efforts to strengthen the real sector to create sustainable economic stability in Indonesia.