scholarly journals Monetary Policy Transmission and Effective Lower Limit of Monetary Policy Interest Rates

2021 ◽  
Vol 69 (2) ◽  
pp. 227-253
Author(s):  
Milan Šimáček
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Lower Limit ◽  
Monetary Policy Transmission ◽  
Policy Transmission ◽  
Policy Interest

Sukuk and monetary policy transmission in Indonesia: the role of asset price and exchange rate channels

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Suriani Suriani ◽  
M. Shabri Abd. Majid ◽  
Raja Masbar ◽  
Nazaruddin A. Wahid ◽  
Abdul Ghafar Ismail
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rates ◽  
Asset Price ◽  
Transmission Mechanism ◽  
Monetary Policy Transmission ◽  
Content Type ◽  
Policy Transmission ◽  
Monetary Policy Transmission Mechanism

Purpose The purpose of this study is to empirically analyze the role of sukuk in the monetary policy transmission mechanism through the asset price and exchange rate channels in the Indonesian economy. Design/methodology/approach Using the monthly data from January 2003 to November 2017, this study uses a multivariate vector error correction model causality framework. To examine the role of sukuk in the monetary policy transmission mechanism through the asset price channel, this study uses the variables of consumption, inflation, interest rates, economic growth and the composite stock price index. Meanwhile, to examine the role of sukuk in the monetary policy transmission mechanism through the exchange rate channel, this study used variables of inflation, interest rates, economic growth, foreign investment and exchange rate. Findings This study documented that sukuk has no causal relationship with inflation through asset price and exchange rate channels. Nevertheless, sukuk has a bidirectional causal relationship with economic growth through asset price and exchange rate channels. Sukuk is also documented to have a causal relationship with monetary policy variables of interest rate and stock prices through asset price and exchange rate channels. Finally, a unidirectional causality is recorded running from the exchange rate to sukuk in the exchange rate channel. Research limitations/implications The finding of independence of the sukuk market from interest rates provides evidence that the trading of the sukuk in Indonesia has been in harmony with the Islamic tenets. Practical implications The relevant Indonesian authorities need to enhance both domestic and global sukuk markets as part of efforts to promote the sustainability of Islamic capital market development in Indonesia. Originality/value To the best of the authors’ knowledge, this study is among the first attempts to empirically investigate the role of sukuk in monetary policy transmission through asset price and exchange rate channels in the context of the Indonesian economy.

scholarly journals Interest Rate Channel of Monetary Policy Transmission Mechanism and Commercial Banks Earnings in Nigeria

2021 ◽  
Vol 4 (3) ◽  
pp. 194-214
Author(s):  
Uzah K. C. ◽  
Clinton A.M. ◽  
Kpagih L.
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Commercial Banks ◽  
Transmission Mechanism ◽  
Monetary Policy Transmission ◽  
Short Term ◽  
Policy Transmission ◽  
Lending Rate ◽  
Monetary Policy Transmission Mechanism

This study examined the interest rates channel of the monetary policy transmission mechanism and the earnings of commercial banks in Nigeria. The objective was to investigate the extent to which the interest rates channel of the monetary policy transmission mechanism affects the earnings capacity of the quoted commercial banks. Time series data were sourced from annual financial reports of the commercial banks and the Central Bank of Nigeria statistical bulletin’s various issues. Earnings measures such as earnings per share and earnings before interest and tax were modeled as the function of Monetary Policy Rate, Prime Lending Rate, Short-term Savings Rate, Long-term Saving Rate and Maximum Lending Rate. The Ordinary Least Square method of Regression Analysis was used to estimate the relationship between the dependent and the independent variables. Augmented Dickey Fuller Test, Johansen Cointegration Test, Granger Causality Test and Vector Error Correction Test were used to determine the dynamic relationship among the variables. Findings showed that short-term and long-term savings rates have negative effects while monetary policy rate, maximum lending rate and prime lending rate have positive effects on the earnings capacity of Nigerian commercial banks. Therefore, we recommend that interest rate policies should be integrated with the earning objectives of the commercial banks.

Interest Rates and Macroeconomic Investment under Uncertainty

2021 ◽  
Vol 54 (3) ◽  
pp. 319-345
Author(s):  
Ansgar Belke ◽  
Matthias Göcke
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Central Banks ◽  
Monetary Policy Transmission ◽  
Policy Transmission ◽  
Rate Effects ◽  
Exact Shape ◽  
Micro Level ◽  
The Interest Rate

The interest rate is generally considered as an important driver of macroeconomic investment characterised by a particular form of path dependency, “hysteresis”. At the same time, the interest rate channel is a central ingredient of monetary policy transmission. In this context, we shed light on the issue (which currently is a matter of concern for many central banks) whether uncertainty over future interest rates at the zero lower bound hampers monetary policy transmission. As an innovation we derive the exact shape of the “hysteretic” impact of rate changes on macroeconomic investment under different sorts of uncertainty. Starting with hysteresis effects on the micro level, we apply an adequate aggregation procedure to derive the interest rate effects on a macro level. Our results may serve as a guideline for future central banks’ policies on how to stimulate investment in times of low or even zero interest rates and uncertainty.

scholarly journals Monetary policy transmission mechanisms in Indonesia: revisiting the role of Divisia money

2020 ◽  
Vol 185 (9-10) ◽  
pp. 91-98
Author(s):  
Maggie May-Jean Tang ◽  
◽  
Chin-Hong Puah ◽  
I Gusti Ayu Purnamawati ◽  
◽  
...  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Monetary Policy Transmission ◽  
Vector Autoregressive ◽  
Transmission Mechanisms ◽  
Long Run ◽  
Svar Model ◽  
Policy Transmission ◽  
Structural Vector

This study examines the performance of monetary policy transmission mechanisms in Indonesia from the money view. The best choice of a monetary policy transmission channel has been a topic of debate for many years among researchers as well as central banks. This is mainly due to the inconsistent performance of different channels across countries and period of time. Therefore, it is crucial for policymakers to have a prior understanding of the strengths of the various monetary policy transmission channels. The role of Divisia money in the process of transmission mechanism has also been considered in the Structural Vector Autoregressive (SVAR) model of this study with eight variables and quarterly data from 1984Q1 to 2019Q4. In Indonesia, interest-rates are the major tool used by the central bank to achieve the targeted inflation rate. However, our empirical analysis has shown otherwise, suggesting that other channels are better in ensuring the transmission smoothness of the monetary policy. In addition, depending on whether a short- or long-run effect is desired, a different channel should be adopted to transmit the intended impact. This study has affirmed the superiority of Divisia money since most of the fluctuations in the key domestic macroeconomic variables in Indonesia can be explained by the monetary aggregate.

scholarly journals Monetary policy transmission and growth of the manufacturing sector in Algeria

2016 ◽  
Vol 13 (4) ◽  
pp. 212-224
Author(s):  
Adeleke Omolade ◽  
Harold Ngalawa
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Money Supply ◽  
Manufacturing Sector ◽  
Output Growth ◽  
Gdp Growth ◽  
Monetary Policy Transmission ◽  
Vector Autoregressive ◽  
Policy Transmission ◽  
Monetary Policy Transmission Mechanism

The principal objective of this study is to investigate the relationship between monetary policy and growth of the manufacturing sector in Algeria. Using a structural vector autoregressive model and quarterly frequency data for the period 1980Q1 to 2010Q4, the study finds no evidence that money supply responds to fluctuations in manufacturing sector growth or Gross Domestic Product (GDP) growth. Interest rates, however, are seen to explain nearly a third of the variations in manufacturing output growth, suggesting that the manufacturing sector is sensitive to interest rates. The study also reveals that money supply variations are largely explained by changes in interest rates. A peek at the monetary transmission process reveals that Algeria employs monetary aggregates as the primary operating tool of monetary policy. The monetary authorities adjust total money supply in response to any movements in the rate of interest, probably to keep the rate of interest within a certain target given other developments in the fundamentals. The interest rates, in turn, play an important role in determining variations in manufacturing sector growth. In addition, the interest rates significantly affect exchange rates, which are observed to respond to changes in overall GDP growth. It is the overall GDP growth that has the largest influence on manufacturing sector growth, probably due to strong forward and backward linkages between the manufacturing sector and other sectors of the economy. Keywords: Monetary policy, transmission mechanism, manufacturing output, oil price shocks. JEL Classifications: E23, E31, E52

Long-run and Short-run Monetary Policy Transmission Channels in Lebanon

2018 ◽  
Vol 14 (1) ◽  
Author(s):  
Ali Awdeh
Keyword(s):  
Monetary Policy ◽  
Private Sector ◽  
Interest Rates ◽  
Banking Sector ◽  
Foreign Currency ◽  
Monetary Policy Transmission ◽  
Long Run ◽  
Policy Transmission ◽  
Short Run ◽  
Pass Through

Abstract This research detects the existence of monetary policy transmission mechanisms in Lebanon through which the actions of the central bank propagate. By adopting co-integration analysis and VECM frameworks, and by exploiting monthly data between January 1994 and December 2016, the research revealed the existence of a long-run interest rate channel, affecting both resident private sector deposits and credit to the private sector. Another short-run capital channel was revealed, affecting total credit provided by the banking sector. Additionally, the empirical results show that (1) deposit inflows are not attracted by high interest rates, but stimulated by confidence provided by large foreign currency reserves held by the central banks; (2) non-residents deposit inflows could represent a substitute for local credit; (3) banks pass-through any increase in funding cost to borrowers; and (4) an increase in external interest rates may trigger deposit outflows.

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