This paper aims to re-examine the regional convergence hypothesis on income in Indonesia over the 2000-2017 period. By applying a non-linear dynamic factor model, this paper tests the club convergence hypothesis using a novel dataset of income at the district level.The results show significant five convergence clubs in Indonesian districts' income dynamics, implying the persistence of income disparity problems across districts even after implementing the decentralization policy. The subsequent analysis reveals two appealing features regarding the convergence clubs. First, districts belonging to the same province tend to be in the same club, and second, districts with specific characteristics (i.e., big cities or natural resources-rich regions) dominate the highest income club. Overall, our findings suggest some insightful policy implications, including the importance of differentiated development policies across convergence clubs and inter-provincial development strategies.

We analyze how regional economic structures affect the impact of monetary policy on rates of inflation across 34 Indonesian provinces. The paper first applies structural factor augmented vector autoregressive model (SFAVAR) to all the 34 provinces based on monthly provincial data in order to measure the length and magnitude of responses of regional inflation to monetary policy shock, derived from the consequential impulse response functions of 34 provinces. In the second step, we analyze the impact of economic structures on the length and magnitude of regional inflationary responses of 34 provinces. We find that the impacts of monetary policy across regions are significantly influenced by economic structural variables such as manufacturing sector share to GDP, mining sector share to GDP, bank lending share to GDP and export share to GDP. In addition, we found the spatial lag, rate of inflation of neighboring provinces, is also statistically significant. In a similar fashion, economic structural variables such as manufacturing sector share to GDP, construction sector share to GDP and investment share to GDP are found statistically significant in explaining regional differences of monetary policy efficiency. Our findings imply economic structures of provinces have to be incorporated to designing monetary policy in Indonesia.

This study analyzes regional inflation dynamics in Indonesia through a spatiotemporal context. We employ an exploratory space-time data analysis (ESTDA) on inflation data and its components of 34 provinces in Indonesia during

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