ABSTRACT
Developments in the financial sector can be quite rapid if not offset by developments in the real sector, in turn, led to structural imbalances in the economy (Solikin, 2005). On the under-capacity economy, the fiscal and monetary expansionary policies effectively affect to real output. Simorangkir (2007) describes the optimal monetary policy response will be influenced by several shock scenarios on the impact of fiscal policy and monetary and fiscal policy interactions on social welfare will be positive if the fiscal policy is exogenous. Expansionary fiscal policy, through fiscal stimulus to increase aggregate demand through domestic consumption and investment, assuming constant prices, short term real output will increase, (Simorangkir & Adamanti, 2010). The study uses financial Computable General Equilibrium. The results show that under conditions of financial crisis or economic downturn, the combination of fiscal expansion policy and monetary expansion is very effective to boost economic growth. Developments in the real sector, in turn, led to structural imbalances in the economy (Solikin, 2005). Economic policy focuses on the management of macro-economic stability, fiscal policy will interact with monetary policy to control the macroeconomic balance. Fiscal policy aims to influence aggregate demand side of the economy short term. In addition, this policy can also affect the supply side in the long run through increased economic capacity. Monetary policy is generally analyzed two interrelated main scope, namely: first, the selection variable modeling and monetary policy. Secondly, related to the monetary policy in the economy. This study aims to develop the research results of Yunanto (2013), Yunanto and Henny Medyawati (2013) which expanded research data range to 2013, and the establishment of equality
Reduce Form to complete the research. The purpose of this study is to analyze specifically the internal and external equilibrium model of the economy in the short-term preferences fiscal and monetary policy strategy. This study will formed a reduced form equation based on the previous model i.e. study ofYunanto (2013), and Henny Medyawati (2013). Contribution of this study is to contribute ideas for the implementation of macro-economic policy both fiscal and monetary policy as well as provide an overview of internal and external balance of the economy in Indonesia.
