About

I am a PhD candidate at the Research School of Economics, Australian National University (ANU). I obtained my master's degree in Economics from ANU and my bachelor’s degree in Mathematics from Institut Teknologi Bandung (ITB), Indonesia.

I possess extensive experience in the research industry, particularly in economic modelling for projections and policy simulations. I have authored several papers examining the interplay between monetary policy, macroprudential policy, and the banking sector within the framework of Dynamic Stochastic General Equilibrium (DSGE) in a small open economy.

My recent research interests pertain to macroeconomics and development economics, focusing primarily on monetary policy, income distribution, and resource misallocations. I serve as an economist at the Central Bank of Indonesia and am a core member of the Macro Public Finance Lab at the ANU.

Research tools

• Python
• STATA
• MATLAB
• EViews

Recent work in progress

Prevalent Informality and Labour Allocation

This study examines the extent to which the presence of informality influences the allocation of labour and capital in developing nations. Initially, we document employment segregation and the degree of labour mobility within a highly persistent informal environment. Our findings indicate that labour mobility between employment sectors is inadequate, and access to financial markets remains minimal for the majority of entrepreneurs. Subsequently, we construct a dynamic general equilibrium model that incorporates features of occupational choice with both formal and informal sectors, as well as their associated characteristics, to evaluate the implications for aggregate efficiency and inequality. Our analysis reveals that the presence of informality leads to suppressed output, primarily attributed to the low levels of labour mobilisation between employment sectors. Furthermore, this low labour mobilisation is correlated with insufficient capital accumulation. When labour is directed towards the formal sector, there is a corresponding increase in capital accumulation within the economy, thus magnifying its positive effects on output. Additionally, labour mobilisation exerts varying effects on inequality, contingent upon sector-specific shocks. If a trade-off exists, which pertains to the balance between efficiency and equality, an increase in labour mobility will diminish this trade-off.


Only for illustration. Source: unsplash

Informality, Earnings Dynamics and Inequality: The Case of Indonesia

This study examines the dynamics of earnings and inequality in developing countries characterised by fragmented labour markets and the prevalence of informality. We employ a longitudinal survey that spans over two decades and includes crucial information regarding both formal and informal employment as well as earnings. Our findings indicate an expanding disparity in earnings between the two sectors throughout the duration of the study. Additionally, earnings growth within the informal sector has consistently lagged across all income groups. Moreover, the transitions between the two sectors exhibit rigidity and asymmetry; only a diminutive percentage of informal workers manage to transition into the formal sector, which perpetuates persistent earnings inequality. Our research also reveals that labour earnings within the formal sector are generally less volatile, although there remain significant downside risks. Conversely, informal workers encounter symmetric earnings risks coupled with less severe shocks. Notably, alterations in the labour market activities of household members can partially alleviate earnings fluctuations, while private transfers within social networks may exert an even more substantial effect.


Only for illustration. Source: unsplash

Recent accomplished work

Monetary and Macroprudential Policy Mix under Financial Frictions Mechanism with DSGE Model

This research presents a Dynamic Stochastic General Equilibrium (DSGE) model tailored for Indonesia's small open economy, augmented by financial frictions manifesting as collateral constraints among households and a financial accelerator affecting entrepreneurs. By incorporating the banking sector into the model, it facilitates an examination of the policies necessary to mitigate shocks arising from the banking sector and their repercussions on financial intermediaries, specifically banks, within the economy.

The model illustrates that shocks within the banking sector, such as an increase in the Capital Adequacy Ratio (CAR) requirement, influence the real sector via the credit channel, consequently undermining Gross Domestic Product (GDP) and causing a decrease in the inflation rate. The mechanism of the financial accelerator evidenced in the model reveals a procyclical nature of the financial system in relation to economic conditions. Economic contractions prompt a reduction in the amount of credit extended by the banking sector, which represents the primary risk encountered by banks. In situations characterized by an uptick in ex-post idiosyncratic shocks, surpassing ex-ante projections, it becomes evident that the banks' assessments of an entrepreneur's anticipated return on capital outweigh actual outcomes, compelling banks to absorb the associated risks. Such circumstances induce banks to curtail credit allocations to safeguard their capital reserves.

Simulations indicate that a combined approach of monetary and macroprudential policies not only secures sustainable GDP growth and stable inflation but also contributes to the regulation of consumption, thereby decreasing the demand for imported goods. In conjunction with stable export levels, a deceleration in imports is likely to yield beneficial effects on the current account.


Only for illustration. Source: unsplash

Contact:

Copland Building, Room 2115
College of Business and Economics
24 Kingsley St.
Acton, ACT, 2601
Australia

Email: fajar.oktiyanto@anu.edu.au
Email: fajar_o@bi.go.id
Linkedin: fajaroktiyanto

Other links:

ANU webpage
Google Scholar