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.

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 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

scholarly journals Measuring the Channels of Monetary Policy Transmission: A Factor-Augmented Vector Autoregressive (Favar) Approach

2016 ◽  
Vol 5 (2) ◽  
pp. 5-40 ◽  
Author(s):  
Dawit Senbet
Keyword(s):  
Monetary Policy ◽  
Operating Regime ◽  
Impulse Response Functions ◽  
Credit Channel ◽  
Monetary Policy Transmission ◽  
Vector Autoregressive ◽  
Transmission Mechanisms ◽  
Policy Transmission ◽  
Information Set ◽  
The U.S

Abstract There is more consensus on the effects of monetary policy than its transmission mechanism. Two channels of transmission mechanisms are the conventional interest rate channel and the credit channel. I investigate the channels of monetary policy transmission in the U.S. using the factor-augmented vector autoregressive (FAVAR) models developed by Bernanke, Boivin & Eliasz (2005). The newly developed FAVAR approach allows the researcher to include all relevant macroeconomic variables in the model and analyze them. Therefore, the FAVAR models span a larger information set and generate better estimates of impulse response functions than the commonly used vector autoregressive (VAR) models that utilize only 4–8 variables. I include 154 monthly U.S. time series variables for the period 1970–2014. The findings support the existence of the credit channel in the U.S. The conclusion remains the same when the non-borrowed reserve operating regime (October 1979–October 1982) is removed from the sample period.

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.

The SOE Channel of Monetary Policy Transmission: Evidence from China's Economic Stimulus Package

2021 ◽  
pp. 1-21
Author(s):  
Wenbin Chen ◽  
Shi-Zhuan Han ◽  
Jie Li ◽  
Tianhang Zhou
Keyword(s):  
Monetary Policy ◽  
Propensity Score ◽  
Propensity Score Matching ◽  
Bank Loans ◽  
Monetary Policy Transmission ◽  
Difference In Difference ◽  
Policy Transmission ◽  
High Level ◽  
Stimulus Package

Abstract We examine the state-owned enterprises (SOEs) channel in monetary policy transmission in the context of China's 2008 stimulus package. Using a difference-in-difference approach, we show that the higher SOE share in the cities after the stimulus package, the more bank loans issued in the cities. Furthermore, we find that the role of SOEs in monetary policy transmission is more significant in underdeveloped cities and cities with a high level of government intervention. We adopt propensity score matching difference-in-difference to deal with potential endogeneity problem. The baseline results also survive a series of robustness tests.

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