scholarly journals STABILITAS SISTEM PERBANKAN DAN KEBIJAKAN MONETER : KETERKAITAN DAN PERKEMBANGANNYA DI INDONESIA

2007 ◽  
Vol 8 (4) ◽  
Author(s):  
Perry Warjiyo
Keyword(s):  
Monetary Policy ◽  
Banking System ◽  
Monetary Transmission ◽  
Crisis Period ◽  
Credit Risks ◽  
Major Market ◽  
Market Risks ◽  
Transmission Mechanisms ◽  
Excess Liquidity ◽  
Banking Stability

This paper reviews the inter-linkage between banking stability and monetary policy, with a reference to the Indonesian case since the 1997 crisis. In particular, it shows how monetary transmission mechanism would be inhibited and thus monetary policy would not be effective when the banking system is not sound and stable, such as during a crisis period. Conversely, the stance and response of monetary policy would have significant impacts on banking stability as inflation, exchange rate, and interest rate constitute major market risks to banking operations. For Indonesia, a close inter-linkage between banking instability and monetary policy ineffectiveness has been vividly evidenced during the crisis period of 1997 – 1999. Subsequently, however, with progress of the banking restructuring programs that Indonesia authorities have undertaken, the banking conditions have imporved considerably since 2000. As banking intermediation improved, not only has financing to economic growth increased but also monetary transmission mechanisms strengthened considerably. Nonetheless, excess liquidity that banking system is still experiencing, especially because of lack of feasible investment outlests in the real sector and high perceived credit risks from the bankers, poses serious challenges to the central bank for better coordination and striking the optimal balance between maintaining monetary and banking stability while continue to promoting economic growth.Keyword: banking stability, monetary policy, IndonesiaJEL : G21, E52, N25

scholarly journals MONETARY POLICY PASS-THROUGH, EXCESS LIQUIDITY AND PRICE SPILLOVER: A COMPARATIVE STUDY OF CONVENTIONAL AND ISLAMIC BANKS OF PAKISTAN

2019 ◽  
Vol 5 (2) ◽  
Author(s):  
Omer Omer
Keyword(s):  
Monetary Policy ◽  
Banking System ◽  
Islamic Banks ◽  
Excess Liquidity ◽  
Retail Prices ◽  
Monetary Policy Shock ◽  
Pass Through ◽  
Using Data ◽  
Conventional Banks ◽  
Conventional And Islamic Banks

This study investigates the comparative pass-through of policy rate to the retailprices, spillover of prices between Islamic and conventional banking systems, and theimpact of excess liquidity on these pass-throughs using data from interbank marketof Pakistan. The results suggest that the monetary policy shock affect retail prices ofIslamic banks similar to conventional banks, confirming the results of earlier studies.Moreover, there is a strong spillover between the prices of two systems; Islamicbanks are following (leading) the conventional banks in pricing the lending (deposit)products. Islamic bank has acquired advantage in the deposit pricing by taping thereligious depositors, which also may have promoted financial inclusion therebycontributing to the economic growth and improved income distribution in the society.Our findings suggest that the presence of excess liquidity have no effect on passthroughof policy rate in the Islamic system, which is contrary to the prevalent notion.However, excess liquidity significantly affects the spillovers of prices between thesystems. These results support the hypothesis that the Islamic banks are investing ininterest-based government securities indirectly via conventional banks. Our findingsmay help in enhancing the regulatory efficiency of the central banks and the conduct ofthe monetary policy in the countries where dual banking system exists.

scholarly journals The Role of Bank Loans and Deposits in the Monetary Transmission Mechanism In Malaysia

2009 ◽  
Author(s):  
Salina Kassim ◽  
M. Shabri A. Majid
Keyword(s):  
Interest Rates ◽  
Banking Sector ◽  
Banking System ◽  
Decomposition Analysis ◽  
Bank Loans ◽  
Monetary Transmission ◽  
Impulse Response Functions ◽  
Crisis Period ◽  
Transmission Process ◽  
Bank Deposits

This study attempts to determine the importance of the banking sector in the monetary transmission process in a developing economy. The study analyzes the Malaysian data focusing on three sample periods: the entire sample period (1989:01-2006:12); the pre-crisis period (1989:01-1996:12); and the post-crisis period (1999:01-2006:12). To achieve this objective, the study relies on two tests: first, the auto-regressive distributed lag (ARDL) model for the long-run relationship among the variables and second, the impulse response functions and variance decomposition analysis for the short-run relationship among the variables. The finding shows that both bank deposits and loans play crucial roles in the monetary transmission process in the economy, suggesting evidence for the money endogeneity theory of post-Keynesian economists. In particular, bank deposits and loans are shown to provide an important link from monetary policy to output. This underscores the importance of ensuring the soundness of banking system as a pre-requisite to economic stability in the absence of such market based tools as market-based actions on exchange rate or interest rates as monetary stabilisation tools.  

scholarly journals Effectiveness of Expectation Channel of Monetary Transmission Mechanism in Inflation Targeting System: An Empirical Study for Turkey

2016 ◽  
Vol 6 (2) ◽  
pp. 222-231
Author(s):  
Aslı Güler
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Inflation Targeting ◽  
Critical Role ◽  
Economic Consequences ◽  
Transmission Mechanism ◽  
Monetary Transmission ◽  
Inflation Expectations ◽  
Transmission Mechanisms ◽  
Main Challenge

Monetary policy can affect economy through out various transmission mechanisms. One of this transmission mechanisms is expectations channel. The monetary policy can get involved in expectation channel of transmission mechanism by affecting the process of expectations formation. Because  the results of policies to be implemented vary according to the expectations, the main challenge in monetary policy is to correctly manage expectations. Because of the fact that only the systematic component of monetary policy (estimated component) can affect forward looking expectations, systematic behavior of the central bank has a critical role in determining the economic consequences of monetary policy. In this study, the effectiveness of expectation channel of transmission mechanism   was analyized by VAR model.  According the results  TCMB cannot affect inflation expectations via both the inflation targets and the policy interest. On the other hand, inflation expectations are affected significantly from actualized inflation rates and exchange rates.   Keywords: Central bank, Expectations, Monetary transmission mechanisms,  Monetary policy

scholarly journals Management Of Banking System Liquidity In The Czech Republic

2011 ◽  
Vol 10 (1) ◽  
Author(s):  
Karel Bruna
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Structural Changes ◽  
Banking System ◽  
Policy Instruments ◽  
The Czech Republic ◽  
Excess Reserves ◽  
Excess Liquidity ◽  
Volatility Analysis ◽  
Implementation Of Monetary Policy

Implementation of monetary policy assumes that monetary policy instruments stabilize O/N interest rates to the proximity of main policy rate to achieve monetary targets. The function of stabilizing mechanism is based on simple rule that the volume of liquidity in the banking system is held in line with the demand of banks for reserves. In this paper main factors of banking system liquidity are analyzed in the context of bank’s imperfect intertemporal substitution of reserves and with respect to predictibility of O/N interest rates volatility. Analysis of O/N PRIBOR and CZEONIA reference interest rates prove Czech National Bank’s ability to stabilise O/N interest rates disregard overall excess liquidity in the banking system. It also identified structural changes acting in the money market like reduced instability of demand for reserve and decreased volatility of O/N interest rates due to intdroduction of credit facility or increased volatility of the spread between O/N interest rates and repo rate due to reduction of frequency of repo tenders. Rapid increase in the volatility of differences between OMO target and bank’s supply of excess reserves is also resulting in the weakening of a direct relationship between O/N PRIBOR dynamics and repo tenders.

On the Exchange Rate Policy

2010 ◽  
pp. 21-28
Author(s):  
K. Yudaeva
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Inflation Targeting ◽  
Exchange Rate Policy ◽  
Institutional Changes ◽  
Crisis Period ◽  
Local Currency ◽  
High Inflation ◽  
Rate Policy ◽  
The Exchange Rate

The level of trust in the local currency in Russia is very low largely because of relatively high inflation. As a result, Bank of Russia during crisis times can not afford monetary policy loosening and has to fight devaluation expectations. To change the situation in the post-crisis period Russia needs to live through a continuous period of low inflation. Modified inflation targeting can help achieve such a result. However, it should be amended with institutional changes, particularly development of hedging instruments.

The Role of Different Channels in Transmitting Monetary Policy into Output and Price in Vietnam

2015 ◽  
pp. 20-40
Author(s):  
Vinh Nguyen Thi Thuy
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Money Supply ◽  
Monetary Transmission ◽  
Impulse Response Functions ◽  
Short Run ◽  
The Exchange Rate ◽  
The Interest Rate ◽  
Interest Rate Channel

The paper investigates the mechanism of monetary transmission in Vietnam through different channels - namely the interest rate channel, the exchange rate channel, the asset channel and the credit channel for the period January 1995 - October 2009. This study applies VAR analysis to evaluate the monetary transmission mechanisms to output and price level. To compare the relative importance of different channels for transmitting monetary policy, the paper estimates the impulse response functions and variance decompositions of variables. The empirical results show that the changes in money supply have a significant impact on output rather than price in the short run. The impacts of money supply on price and output are stronger through the exchange rate and credit channels, but however, are weaker through the interest rate channel. The impacts of monetary policy on output and inflation may be erroneous through the equity price channel because of the lack of an established and well-functioning stock market.

scholarly journals TREASURY BILLS AND/OR CENTRAL BANK BILLS FOR ABSORBING SURPLUS LIQUIDITY: THE MAIN CONSIDERATIONS

2013 ◽  
Vol 04 (02) ◽  
pp. 1350011
Author(s):  
OBERT NYAWATA
Keyword(s):  
Central Bank ◽  
Banking System ◽  
Central Banks ◽  
Market Development ◽  
Practical Reasons ◽  
Treasury Bills ◽  
Positive Externalities ◽  
Excess Liquidity ◽  
Challenging Question ◽  
Transmission Of Monetary Policy

This paper discusses the challenging question of whether central banks should use Treasury bills or central bank bills for draining excess liquidity in the banking system. While recognizing that there are practical reasons for using central bank bills, the paper argues that Treasury bills are the first best option especially because of the positive externalities for the financial sector and the rest of the economy. However, the main considerations in the choice should be: (i) operational independence for the central bank; (ii) market development; and (iii) the strengthening of the transmission of monetary policy impulses.

scholarly journals Monetary Transmission Channel, Oil Price Shock and the Manufacturing Sector in Nigeria

2019 ◽  
Vol 19 (1) ◽  
pp. 89-113
Author(s):  
Adeleke Omolade ◽  
Philip Nwosa ◽  
Harold Ngalawa
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Inflation Rate ◽  
Manufacturing Sector ◽  
Output Growth ◽  
Oil Price ◽  
Monetary Transmission ◽  
Oil Price Shock ◽  
Price Shock ◽  
The Exchange Rate

Abstract Research background: The need for diversification of the Nigerian economy has been emphasized and the manufacturing sector has a major role in this. Being an oil producing country, monetary policy is an important macroeconomic policy that has always been used to manage the influence of oil price shock on the manufacturing sector. Purpose: The study examines the relationship between oil price shock, the monetary transmission mechanism and manufacturing output growth in Nigeria. Research methodology: The study applied the structural vector auto regression (SVAR) modelling technique and a descriptive analysis. Results: The results of the study show that the exchange rate is mostly affected by the oil price shock, while the monetary policy instruments and inflation rate are also very responsive to the exchange rate shock. The manufacturing sector output growth has also been shown to be strongly affected by the inflation rate and monetary policy shocks. Novelty: The study has revealed the most effective channel via which oil price shocks affect manufacturing output. The exchange rate channel of the monetary policy transmission mechanism is the most significant channel through which oil price shock affects manufacturing output growth in Nigeria. This shows that effective management of the exchange rate policy via the appropriate monetary policy approach can be used to minimize the adverse effect of oil price shocks on Nigerian manufacturing output.

Sign in / Sign up

Export Citation Format

Share Document