| According to UU No. 23, 1999 about Indonesian Bank, Indonesian Bank have one target that is attain rupiah stability. Attainment of low inflation is a prerequisite to reaching other macroeconomic targets, i.e. economic growth and employment. Empirical and theoritical evidences indicate that inflation target can reach through Quantity Channel and Price Channel. This research aim to know of transmission line is which most having an effect to inflation and also to know long run stability among the variables in each channel. Result of this research indicate that price channel more effective in monetary policy transmission, specified inflation target, and also there are long run eqilibrium among variables in price channel. PUAB / ON interest rate is contribute the most to inflation target, so monetary policy is important to be directed to maintain short run interest rate, in order inflation target can be reach. |