QUESTION:

After its pandemic-related collapse in 2020, the world economy continues to suffer from a series of supply shocks since mid-2021: rising oil prices due to Russia's invasion of Ukraine; rising global food prices because of the increasing intensity of drought; and shipping bottlenecks. And globally, 9 out of 18 central banks hiked their policy rates in July 2022. Similarly, Bank Indonesia also raised the BI 7-day Reverse Repo Rate in August 2022. Explain the rationale behind this policy using the national income identity and AD-AS curves. Also, please explain the stabilization policy dilemma faced by the policymakers.