Fajar Oktiyanto

PhD Candidate in Economics at Research School of Economics, The Australian National University

Research Interest: Macroeconomics, Development Economics, Monetary Economics







I am a fourth-year PhD student at the Research School of Economics, College of Business and Economics, The Australian National University. My research interest is in macroeconomics, development economics, and monetary economics. Experienced working in the research industry, mainly about economic modeling for the purpose of economic projection and policy simulation. Produced several papers on the interaction between monetary policy, macroprudential policy and banking sector within the framework of DSGE in a small open economy.

My recent research interest lies in the area of macroeconomics and development economics, primarily concerning monetary policy, income distribution and resource misallocations. I am currently working as an economist at the Central Bank of Indonesia and as a core member of the Macro Public Finance Lab @ANU.

Research tools

Recent work in progress

Prevalent Informality and Labour Allocation

This paper studies the impact of the informal sector on aggregate macroeconomic variables using the heterogeneous agents general equilibrium model. This study finds that the existence of informality causes a trade-off between efficiency and equality. The degree of the trade-off varies for different degrees of informality and the proportion of high-skilled labour in the informal sector. A lower share of informality is more favourable since it will decrease the degree of trade-off between efficiency and equality. Increasing productivity in the corporate sector will increase output but also inequality, mainly contributed by a greater dispersion in the lower tail distribution, where the dispersion between low- and middle-income groups is widening. However, the impact of the increase in inequality is smaller as the proportion of informality decreases. A lower proportion of high-skilled labour in informal employment reduces the misallocation of resources and lowers the degree of trade-off. A low degree of trade-off goes hand in hand with a low level of misallocation of resources, which suggests that intensive margin labour allocation also plays an important role in containing the negative consequences of informality, especially in rigid labour transition conditions.

Only for illustration. Source: unsplash

Informality, Earnings Dynamics and Inequality: The Case of Indonesia

We study earnings dynamics and inequality in developing countries where labour markets are fragmented, and informality is a prominent feature. We use Indonesia Family Life Survey (IFLS) - a longitudinal survey from 1993 to 2014 - that contains key information on formal and informal employment and earnings. We find a widening earnings gap between the two sectors over the study period. Earnings growth in the informal sector has felt behind for all income groups. Labour earnings are less volatile in the formal sector, but significant downside risks exist. Moreover, transitions between the two sectors are rigid and asymmetric. Only a relatively small fraction of informal workers are able to switch to the formal sector, which subsequently contributes to persistence in earnings inequality. Finally, family insurance provided by adjustments in household members' labour market activities, assets and transfers from the family network can partially smooth earnings fluctuations.

Only for illustration. Source: unsplash

Recent accomplished work

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

This research develops a DSGE model for Indonesia's small open economy, complemented by financial frictions in the form of collateral constraints amongst households and a financial accelerator amongst entrepreneurs. Including the banking sector in the model enables analysis of the policies required to mitigate shocks originating in the banking sector or other shocks and their influence on financial intermediaries in the form of banks in the economy.

The model demonstrates that shocks in the banking sector, for instance, raising the CAR requirement, impact the real sector through the credit channel, which undermines GDP and lowers the inflation rate. The financial accelerator mechanism in the model evidence procyclicality in the financial system to economic conditions. An economic contraction elicits a response from the banking industry to reduce the amount of credit allocated, which is the root of the risk faced by the banks. In the face of rising ex-post idiosyncratic shocks, exceeding those ex-antes indicates that bank assessments of an entrepreneur's expected return on capital are more significant than the actual realization, forcing banks to bear the risk. Such conditions encourage banks to reduce credit disbursement to avoid eroding bank capital.

The simulations show that a policy mix of monetary and macroprudential policy not only achieves sustainable GDP and stable inflation but also helps to control consumption, thereby reducing demand for imported goods. Coupled with stable exports, a slowdown in imports will have a favourable effect on the current account.

Only for illustration. Source: unsplash


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

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

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