scholarly journals Application of threshold vector error correction model (TVECM) in describing adjustment of interest rate of working capital credit to BI rate movement

2017 ◽  
Vol 1 (2) ◽  
pp. 31-43
Author(s):  
Gama Putra Danu Sohibien
Keyword(s):  
Interest Rate ◽  
Selection Criteria ◽  
Working Capital ◽  
Correction Model ◽  
Vector Error Correction ◽  
Policy Tool ◽  
Vector Error ◽  
Bank Behavior ◽  
The Interest Rate ◽  
Better Than

Knowledge about bank behavior in adjusting the interest rate to BI rate movement is important not only for debtors to make a decision to borrow money, but also for government to know whether BI rate as a monetary policy tool success in influencing the movement of interest rate. The approach used for analyzing the data in this paper is TVECM. The data used in this paper are interest rate of working capital credit of conventional bank and BI rate of January 2008–July 2016. Bank is more agressive in correcting the disequilibrium by increasing the interest rate of working capital credit than decreasing it. Interest rate of working capital credit is significantly adjusted by bank approximately 64.95% of its disequilibrium when the disequilibrium is lower than 0.96. When it is between 0.96 and 0.76, interest rate of working capital credit will be adjusted approximately 11.87% of its disequilibrium.When it is higher than 0.76, interest rate of working capital credit will be adjusted approximately 11.88% of its disequilibrium. Moderate interest rate of working capital credit based on BI rate consideration is between 1.74 BI rate –0.96 and 1.74 BI rate +0.76. According to the selection criteria values, TVECM is better than VECM and VAR in modeling relationship between BI rate and interest rate of working capital.

scholarly journals Stability of the demand for money in Russia in 2001–2019

2020 ◽  
Vol 26 (10) ◽  
pp. 2328-2345
Author(s):  
R.A. Artsruni
Keyword(s):  
Interest Rate ◽  
Money Demand ◽  
Wald Test ◽  
Demand For Money ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Johansen Cointegration Test ◽  
The Interest Rate ◽  
The Stability

Subject. This article investigates the stability of the money demand in Russia over the 2001Q1 to 2019Q4 period. Objectives. Using econometric tools, the article estimates the long-and short-term relationships between monetary aggregates and their determinants. Methods. For the study, I used the Johansen cointegration test, Vector Error Correction Model (VECM), and the Wald test. Results. The article presents the results of an analysis of the relationships between money demand for M1 and M2 money supply. Conclusions. Understanding the demand for money can be useful if the central bank uses an unconventional monetary policy to regulate zero interest rate. The money demand function may tell how much it is necessary to deflate to raise the interest rate above zero.

Does Fiscal Deficit Affect Interest Rate in India? An Empirical Investigation

2016 ◽  
Vol 5 (2) ◽  
pp. 87-103 ◽  
Author(s):  
Ritu Rani ◽  
Naresh Kumar
Keyword(s):  
Interest Rate ◽  
Error Correction ◽  
Money Supply ◽  
Real Interest Rate ◽  
Vector Error Correction Model ◽  
Fiscal Deficit ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run

Fiscal deficit above a certain limit is not good for the country because high government borrowings raise the interest rate and crowd out private investment. This article is an attempt to analyze the impact of fiscal deficit on real interest rate in India over the time period of 1980–1981 to 2013–2014. Autoregressive distributed lags bound testing approach for cointegration and vector error correction model for Granger casualty are used in a multivariate framework in which money supply and inflation are included as additional variables. Bound test results confirm the long-run equilibrium relationship among the competing variables. Further, the rate of interest and fiscal deficit are positively related with each other in long run, whereas money supply and inflation are found to be negative and statistical significant. In addition, results of vector error correction model showed that there is unidirectional causality running from inflation to real interest rate in short run. Based on the findings, it is suggested that that proper fiscal consolidation is required to control high fiscal deficit and burgeoning interest rate in India. Further, government should move from market borrowing to tax revenue to offset fiscal deficit.

MODEL PERMINTAAN UANG DI INDONESIA DENGAN PENDEKATAN VECTOR ERROR CORRECTION MODEL

2020 ◽  
Vol 5 (3) ◽  
Author(s):  
Imam Mukhlis
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Error Correction ◽  
Error Correction Model ◽  
Vector Error Correction Model ◽  
Demand For Money ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run

This research aims to estimate the demand for money model in Indonesia for 2005.22015.12. The variables used in this research are demand for money, interest rate, inflation, and exchange rate (IDR/US$). The stationary test with ADF used to test unit root in the data. Cointegration test applied to estimate the long run relationship between variables. This research employed the Vector Error Correction Model (VECM) to estimate the money demand model in Indonesia. The results showed that all the data was stationer at the difference level (1%). There were long run relationship between interest rate, inflation and exchange rate to demand for money in Indonesia. The VECM model could not explain interaction between explanatory variables to independent variables. In the short run, there were not relationship between interest rate, inflation and exchange rate to demand for money in Indonesia for 2005.2-2015.12.

THE CAUSAL RELATIONSHIP BETWEEN INSURANCE AND ECONOMIC GROWTH IN NIGERIA (1986-2010)

2012 ◽  
Vol 02 (12) ◽  
pp. 49-57
Author(s):  
TAIWO AKINLO
Keyword(s):  
Economic Growth ◽  
Interest Rate ◽  
Causal Relationship ◽  
Causality Test ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
Short Run

This study examined the causal relationship between insurance and economic growth in Nigeria over the period 1986-2010. The Vector Error Correction model (VECM) was adopted. The cointegration test shows that GDP, premium, inflation and interest rate are cointegrated when GDP is the edogeneous variable. The granger causality test reveals that there is no causality between economic growth and premium in short run while premum, inflation and interest rate Granger cause GDP in the long run which means there is unidirectional causality running from premium, inflation and interest rate to GDP. This means insurance contributes to economic growth in Nigeria as they provide the necessary long-term fund for investment and absolving risks.

scholarly journals Empirical evidence on Non-Performing Loans and credit frictions: banking sector in Tunisia

2020 ◽  
Vol 2 (3) ◽  
pp. 171-183
Author(s):  
Salha Ben Salem ◽  
◽  
Moez Labidi ◽  
Nadia Mansour ◽  
◽  
...  
Keyword(s):  
Interest Rate ◽  
Error Correction ◽  
Money Supply ◽  
Banking Sector ◽  
Vector Error Correction Model ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Market Interest Rate ◽  
Credit Frictions

Purpose: This paper explores the most important determinants of friction in the Tunisian credit market. The previous literature argued that friction is largely explained by the increase in Non-Performing Loans Nkusu, 2011; Abadi et al. 2014; Rulyasri et al.2017, Roland et all, 2013. Research methodology: We constructed a multivariate Vector Error Correction Model, with five macroeconomic variables (industrial production index, the money supply, money market interest rate) to examine the impact of Non-Performing Loans increase in amplifying the Tunisian credit frictions. Results: The Vector Error Correction Model (VECM) regression results show a negative and important relationship between economic growth and Non-Performing Loans (NPL) ratio, which is very robust during the political crisis of 2011. The money market interest rate and the money supply are positively related to the Non-Performing loan ratio. Limitation: This study was only focused on Tunisian banking sector as one of the pillars of the Tunisian economy. Contributions: This highlights that the nature of the monetary policy adopted by the monetary authority of Tunisia plays a significant role in the fluctuation of the Non-Performing Loans ratio. Bank capitalization is positively and statistically significant with Non-Performing Loan ratio, implying that banks with a low level of capital are more likely to have a riskier credit portfolio that causes the increase of Non-Performing Loans in their balance sheet.

scholarly journals the Effectiveness of Monetary Policy Transmission to Inflation in Indonesia

2019 ◽  
Vol 2 (1) ◽  
pp. 272-284
Author(s):  
Fadilah Zulfa ◽  
Deky Aji Suseno
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Impulse Response Function ◽  
Monetary Policy Transmission ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Policy Transmission ◽  
Gap Data

The purpose of this research is to know and analyze about the comparative effectiveness of monetary policy transmission by interest rate channel and exchange rate channel in influencing inflation in Indonesia. Data used in this research is quarterly time series data from year 2005Q3 until 2017Q1. The variables used in this research are SBI interest rate, interbank call money interest rate, deposit interest rate, loan interest rate, investment, interest rate differential, capital inflow, exchange rate, net export and output gap. Data used in this research sourced by Bank Indonesia, Badan Pusat Statistik, and International Monetary Fund. The method used in this research is Vector Error Correction Model (VECM). The results of this research showed that in the long-term and the short-term in interest rate channel, interbank call money interest rate variables had a significant effect on inflation. Then the results of impulse response function test showed that the mechanism of monetary policy transmission requires outside lag to be able to influence inflation and indicate that the monetary policy transmission through interest rate in influencing the ultimate goal of inflation is more effective than exchange rate.  In addition, variance decomposition results concluded that the rate of interbank call money interest rate variant is appropriately used as an operational target of monetary policy transmission for implementation in influencing inflation. Tujuan penelitian ini untuk mengetahui dan menganalisis perbandingan efektivitas transmisi kebijakan moneter jalur suku bunga dan jalur nilai tukar dalam mempengaruhi inflasi di Indonesia. Data yang digunakan dalam penelitian ini adalah data time series triwulanan dari tahun 2005Q3 sampai dengan 2017Q1. Variabel yang digunakan dalam penelitian ini antara lain suku bunga SBI, suku bunga PUAB, suku bunga deposito, suku bunga kredit, investasi, interest rate differential, capital inflow, nilai tukar, ekspor neto dan output gap. Data penelitian ini berasal dari Bank Indonesia, Badan Pusat Statistik dan International Monetary Fund. Metode yang digunakan dalam penelitian ini adalah Vector Error Correction Model (VECM). Hasil penelitian menunjukkan bahwa pada jangka panjang dan jangka pendek dalam jalur suku bunga, suku bunga PUAB berpengaruh signifikan terhadap inflasi. Hasil uji impulse response function menyatakan bahwa mekanisme transmisi kebijakan moneter memerlukan time lag hingga mampu mempengaruhi inflasi dan menunjukkan bahwa mekanisme transmisi kebijakan moneter melalui jalur suku bunga efektif dalam mempengaruhi sasaran akhir inflasi. Kemudian hasil uji variance decomposition menyimpulkan bahwa varian suku bunga PUAB tepat digunakan sebagai sasaran operasional dari implementasi transmisi kebijakan moneter dalam mempengaruhi inflasi.

scholarly journals The Impacts of Government Spending and Monetary Policy Rate in Indonesia

2021 ◽  
Vol 6 (6) ◽  
pp. 183-187
Author(s):  
Yuniarto Hadiwibowo ◽  
Akhmad Priharjanto
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Money Demand ◽  
Government Spending ◽  
Banking Sector ◽  
Correction Model ◽  
Money Balance ◽  
Vector Error Correction ◽  
Vector Error ◽  
Policy Interest

This study reviews the impacts of government policies on the economy. The period of analysis starts from early banking sector reform until the current Covid-19 pandemic crisis. We apply Vector Error Correction Model based on the theory of money demand and inflation to analyze the relationships among income, inflation, money balance, government spending, and policy interest rate. The impacts of money balance and policy interest rate on income are as predicted by money demand. Financial sector growth and different expectation on inflation affect the efficacy of monetary policy. On the other hand, government spending might not be fully growth-enhancing. The need emerges to classify and distinguish the classes of government spending which increase growth.

MODEL KESEIMBANGAN HUBUNGAN PENGARUH ANTARATINGKAT BUNGA, LAJU INFLASI, DAN KURS VALUTA ASING

2017 ◽  
Vol 11 (2) ◽  
pp. 117
Author(s):  
Endang Setyowati ◽  
Algifari Algifari
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Error Correction ◽  
Foreign Exchange ◽  
Foreign Exchange Rate ◽  
Vector Error Correction ◽  
Vector Error ◽  
Augmented Dickey Fuller ◽  
Rate Vector ◽  
The Interest Rate

The aims of this research is to develop unequilibrium model relationship among interest rate,inflation, and foreign exchange rate in Indonesia using monthly data from January 2011 to April2015. The results of Augmented Dickey-Fuller test shows that the data of interest rate, inflation, andforeign exchange rate in this period is not stationary at level, but stationary in first difference.Johansen Cointegration test results indicate that the interest rate, inflation, and foreign exchange rateare cointegrated. Equilibrium model that used to determine the relationship among interest rate,inflation, and foreign exchange rate is Vector Error Correction models. The results of this studyindicate that interest rate affect on inflation and foreign exchange rate in Indonesia.Keyword: Interest Rate, Inflation, Exchange Rate,Vector Error Correction Model

scholarly journals PENGARUH GUNCANGAN OUTPUT GAP DAN INFLASI TERHADAP SUKU BUNGA SEBAGAI SASARAN OPERASIONAL KEBIJAKAN MONETER DI INDONESIA

2012 ◽  
Vol 1 (2) ◽  
Author(s):  
Utami Baroroh
Keyword(s):  
Time Series ◽  
Interest Rate ◽  
Error Correction ◽  
Time Series Data ◽  
Series Data ◽  
Output Gap ◽  
Vector Error Correction Model ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error

The objectives of this study are to observe interest rate response because shock/innovation of inflation and output gap. The data sample used in this study are quarterly time series data from 1983.1 – 2008.4. Those data are SBI interest rate, inflation (CPI) and output gap. A method of analysis in this study is Vector Error Correction Model (VECM). The empirical results of impulse response show that the effect of inflation and output gap shock to interest rate is positifDOI: 10.15408/sjie.v1i2.2601

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