scholarly journals MONETARY TRANSMISSION MECHANISM UNDER DUAL FINANCIAL SYSTEM IN INDONESIA: CREDIT-FINANCING CHANNEL

2019 ◽  
Vol 4 (2) ◽  
pp. 251-278
Author(s):  
Reza Jamilah Fikri
Keyword(s):  
Monetary Policy ◽  
Error Correction ◽  
Financial System ◽  
Error Correction Model ◽  
Transmission Mechanism ◽  
Monetary Transmission ◽  
Correction Model ◽  
Monetary Transmission Mechanism ◽  
Financing Channel

The presence of Islamic and conventional banking in the dual financial system of Indonesia equally hold the role as financial intermediator which theoretically banks collect fund from the debitors to be distributed to creditors. However, along with the changing of time there has been a development in the financial industry, when financial deregulation occurs, where the role of providing credit is not only owned by the banks but also other financial institutions. As the result, banks are no longer considered as the center of financial intermediation but could be replaced by other financial instruments. This study aims to reconsider the role of banking as financial intermediation in the monetary transmission mechanism using three methodoligal approaches which  are Vector Autoregression and Vector Error Correction Model (VAR-VECM), Error Correction Model (ECM), and Autoregressive Distributed Lag (ARDL). The long-term results of ECM and VECM estimations both show that credit and finacing channel are still relevant to be employed in the monetary transmission mechanism after the development of financial sector and the change of monetary policy, yet only have an impact to economy and do not give effect to inflation. While the result of ARDL estimation indicates that none of the variables affect the  monetary policy objectives which means that credit and financing channel are considered to be getting weaker in the monetary transmission mechanism.   Keywords : Monetary Transmission Mechanism, Credit Channel, Dual Financial System JEL Classification: E51, E52, E58

The Channels of Transmission of Monetary Policy

2021 ◽  
pp. 45-88
Author(s):  
Juan Antonio Morales ◽  
Paul Reding
Keyword(s):  
Monetary Policy ◽  
Emerging Market ◽  
Asset Price ◽  
Balance Sheet ◽  
Transmission Mechanism ◽  
Monetary Transmission ◽  
Monetary Transmission Mechanism ◽  
The Interest Rate ◽  
The Impact ◽  
Transmission Of Monetary Policy

This chapter explores the monetary transmission mechanism (MTM) in low financial development countries (LFDCs). It successively discusses the interest rate, asset price, bank credit, balance sheet, expectations, and real balance channels. For each channel, conceptual aspects about how it operates, how it transmits monetary policy impulses to the economy’s financial and real spheres, are first presented. Next, the impact of the specificities of LFDCs on the channel’s strength and reliability are examined and the available empirical evidence is surveyed. The chapter concludes with a global assessment of the effectiveness of the monetary transmission mechanism in LFDCs. Evidence points to a transmission mechanism that is effective although not very strong, and possibly also more uncertain than in advanced and emerging market countries.

scholarly journals Evolution of the Monetary Transmission Mechanism in the US: the Role of Asset Returns

2015 ◽  
Vol 52 (3) ◽  
pp. 226-243 ◽  
Author(s):  
Beatrice D. Simo-Kengne ◽  
Stephen M. Miller ◽  
Rangan Gupta ◽  
Mehmet Balcilar
Keyword(s):  
Asset Returns ◽  
Transmission Mechanism ◽  
Monetary Transmission ◽  
Monetary Transmission Mechanism ◽  
The Us

scholarly journals ERROR CORRECTION MODEL ANALYSIS OF THE DETERMINANT OF STABILITY OF FINANCIAL SYSTEM IN INDONESIA

2020 ◽  
Vol 1 (2) ◽  
pp. 82-90
Author(s):  
Muhammad Rismawan Ridha
Keyword(s):  
Error Correction ◽  
Banking System ◽  
Financial System ◽  
Error Correction Model ◽  
Economic Openness ◽  
Correction Model ◽  
The Government ◽  
The Stability ◽  
Banking Credit ◽  
The International Monetary Fund

The current condition of economic openness is both an opportunity and a challenge that must be faced wisely by the government. Liberalization and economic integration will have an impact on financial market liberalization, which is highly vulnerable to create crisis in a banking system. This study aims to analyze the factors that influence the stability of the financial system in Indonesia by using the Error Correction Model (ECM). The variables used in this research is Capital Banking Credit sourced from Statistics Indonesia (BPS) and Exchange Rate, Inflation, and Money Supply sourced from the International Monetary Fund (IMF) between 2010 and 2015. The results of the study show that; 1) ECT coefficient which has negative and significant value explains that the model is valid. 2) Inflation significantly affects the stability of the financial system in Indonesia in the long and short term

scholarly journals REAL STOCK PRICES AND THE LONG-RUN MONEY DEMAND FUNCTION IN MALAYSIA: Evidence from Error Correction Model

2004 ◽  
Vol 6 (2) ◽  
pp. 293
Author(s):  
Naziruddin Abdullah ◽  
M. Shabri Abd. Majid
Keyword(s):  
Error Correction ◽  
Money Demand ◽  
Stock Prices ◽  
Positive Association ◽  
Error Correction Model ◽  
Money Market ◽  
Correction Model ◽  
Long Run ◽  
One Year

This study adopts the error correction model to empirically investigate the role of real stock prices in the long run-money demand in the Malaysian financial or money market for the period 1977: Q1-1997: Q2. Specifically, an attempt is made to check whether the real narrow money (M1/P) is cointegrated with the selected variables like industrial production index (IPI), one-year T-Bill rates (TB12), and real stock prices (RSP). If a cointegration between the variables, i.e., the dependent and independent variables, is found to be the case, it may imply that there exists a long-run co-movement among these variables in the Malaysian money market. From the empirical results it is found that the cointegration between money demand and real stock prices (RSP) is positive, implying that in the long run there is a positive association between real stock prices (RSP) and demand for real narrow money (M1/P). The policy implication that can be extracted from this study is that an increase in stock prices is likely to necessitate an expansionary monetary policy to prevent nominal income or inflation target from undershooting.

scholarly journals Banke – specifikum financijske intermedijacije

2018 ◽  
Vol 6 (1) ◽  
pp. 143-154
Author(s):  
Goran Dobrojević ◽  
Davor Jagodić
Keyword(s):  
Capital Market ◽  
Global Financial Crisis ◽  
Financial System ◽  
Transmission Mechanism ◽  
Monetary Transmission ◽  
Monetary Transmission Mechanism ◽  
Public Money ◽  
The Global Financial Crisis ◽  
The Cost ◽  
The Capital Market

The global financial crisis has given some troubled banks at that time a frequently used epithet “too-big-tofail”, which tells how those banks became of systemic importance and their failure meant a real danger of the entire financial system collapsing so governments were saving them from bankruptcy with public money. This paper seeks the answer to the question whether there is something that banks can do which is not possible on the capital market? Is such attention paid to banks justified by their really special nature and do they actually perform some unique functions for which they cannot be replaced by other types of financial intermediaries? This article presents an overview of the research into whether banks are characterized by some specific features versus all other types of intermediaries. The results of the research show that banks have a specific position because of the services they provide - they facilitate payment transactions; they are a source of liquidity to all other economic entities and the channel of the monetary transmission mechanism; they improve efficiency of savings allocation through the transformation of maturity, risk and size of capital, thus affecting the formation of the cost of capital; they participate in the creation of money, etc. At the end of this paper, it is concluded that the specialty of banks cannot be substituted by bonds on the capital market, but the possible replacement of existing money with its digital form and the introduction of the direct monetary transmission mechanism could change the bank’s special status in the financial system.

Asymmetric Information and the Transmission Mechanism of Monetary Policy

2007 ◽  
Vol 8 (3) ◽  
pp. 428-446 ◽  
Author(s):  
Ulrike Neyer
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Asymmetric Information ◽  
Credit Markets ◽  
Transmission Mechanism ◽  
Monetary Transmission ◽  
Credit Channel ◽  
Absolute Value ◽  
Monetary Transmission Mechanism ◽  
External Finance

Abstract This paper analyses the consequences of asymmetric information in credit markets for the monetary transmission mechanism. It shows that asymmetric information can not only reinforce but can also weaken or overcompensate the effects of the standard interest rate channel. Crucial is that informational problems lead to an external finance premium that can be positive or negative for marginal entrepreneurs. Tight money may lead to an increase in the absolute value of this premium, implying that there is a credit channel of monetary policy, but its working direction is ambiguous.

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