| Since 1999, Inflation Targeting is the Framework of Monetary policy in Indonesia. In this framework, interest rate is a nominal anchor monetary policy. This research aims to know effectiveness monetary policy variable such as SB1, money supply, and exchange rate, in influencing output and inflation, by using Vector Autoregression (VAR) approach. The result of data analysis indicates that the change of exchange rate is dominant variable that influence economic growth and inflation in Indonesia. Interest rate have a greater impact in longer period, whereas money supply progressively downhill. As a whole, monetary policy variable more effective in a long term, whereas its influence in short term is relatively small. |