Monetary Whispers Across Space

This open access book explores how macroeconomic policy, specifically monetary policy, interacts with interregional inequality. Using the case of monetary policy in Indonesia, a country with high interregional inequality, it examines how national-level policies can inadvertently deepen disparities between regions, and in turn contribute to the limited effectiveness of the policies. Undermining the local conditions, institutions, and spatial dynamics that could strengthen the centripetal forces plays a key role in such a negative feedback loop.

Although monetary policy is designed to be neutral, the book argues that it can have uneven regional impacts. By amplifying the divide between already developed areas and those still catching up, such policies may undermine their own effectiveness. This self-reinforcing cycle is significantly shaped by the behavior of local banks' liquidity preferences, risk perceptions, and lending strategies, which can either connect or disconnect national policy goals from inclusive regional development.

Drawing on macroregional data, quantitative models, field surveys, and interviews with local officials and bankers, the book offers compelling insights into one of the central challenges of economic policymaking in a diverse and decentralized nation. It also presents a powerful critique of the “spatial blindness” often embedded in economic governance.

Iwan J. Azis is Professor of Emerging Markets within the Dyson School of Applied Economics and Management, and was the Director of Graduate Studies, Regional Science program (2005-2010) at Cornell University where he has taught since 1992. He consulted several governments and organizations in Asia, and was visiting professor in Japan, Australia, Singapore, and Indonesia. He headed the Office of Regional Economic Integration at the ADB, during which he became the Interim Chair of the of the Board of Directors of the Trust Fund-Credit Guarantee Investment Facility (CGIF), and member of the International Policy Advisory Group. He is currently research adviser to the Indonesian Central Bank and the Deposit Insurance Corporation, and a member of International Advisory Panel of the Asian Infrastructure Investment Bank (AIIB). Awarded "Distinguished Scholar in Regional Science, Financial Economics, and Economic Modeling" in 2006, and the recipient of 2022 “Clifton R. Wharton, Jr. Emerging Markets Award,” his research focuses on the interlink between macro-financial economics, social-institutions, and spatial inequalities in emerging markets. His recent books are “Regional Economics: Fundamental Concepts, Policies, and Institutions” (2021), “Periphery and Small Ones Matter: Interplay of Policy and Social Capital” (2022), and “Listen and Design: On Micro, Small and Medium Enterprises” (2024). His recent articles are “Financial Spillover in Emerging Asia” Asian Economic Papers (2021), “Indonesia: A Tale of Three Crises” in Trauma to Triumph: Rising from the Ashes of the Asian Financial Crisis (2022), and “The Sustainability Agenda Humankind Needs” in D+C Development and Cooperation (2024).