scholarly journals Analysis of the Effectiveness of Monetary Policy Transmission through a Line of Credit and Inflation Expectations in Indonesia

2021 ◽  
Vol 8 (5) ◽  
pp. 299-309
Author(s):  
Suti Masniari ◽  
Sirojuzilam . ◽  
Dede Ruslan
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Regression Model ◽  
Interest Rates ◽  
Secondary Data ◽  
Transmission Mechanism ◽  
Output Gap ◽  
Inflation Expectations ◽  
Policy Transmission

This study aims to determine the effectiveness of the transmission mechanism of monetary policy by reviewing the amount of the deadline that required the transmission mechanism of monetary policy in achieving the goals of the final form of the output gap and inflation by using the channel of credit and inflation expectations. In addition, this study also aims to determine the relationship long-term and short against the target output gap and inflation. This study uses a regression model Vector Error Correction Model (VECM) to estimate the influence of the transmission mechanism of monetary policy to the output gap and inflation through the channel of credit and the regression model of Vector Autoregression (VAR) to estimate the influence of the transmission mechanism of monetary policy to the output gap and inflation through the channel of inflation expectations. The Data used in this research is the data series time quarter from 2008 to 2018. Data peneliltian used to estimate the influence of the transmission mechanism of monetary policy to the output gap and inflation through the channel of credit in the form of secondary data consisting of the benchmark interest rate of Bank Indonesia, the interest rates on the interbank money market 1 month, loan interest rates, money supply (M2) and the amount of working capital loans disbursed. While the data used to estimate the influence of the transmission mechanism of monetary policy to the output gap and inflation through the channel of inflation expectations in the form of secondary data consisting of the benchmark interest rate of Bank Indonesia, inflation expectations. The secondary Data used is sourced from the annual reports that are published from the official website of the Bank of Indonesia, the data of the Central Bureau of Statistics and the International Monetary Fund. The results of this study showed that the effectiveness of the transmission mechanism of monetary policy through the credit channels require the deadline each of the 8 (eight) of the quarter and 10 (ten) quarter in achieving the goals of the end of the output gap and inflation. While the effectiveness of the transmission mechanism of monetary policy through the channel of inflation expectations require the deadline each of the 4 (four) quarter and 6 (six) quarter in achieving the goals of the end of the output gap and inflation. The results also showed only policy transmission mechanism built rmelalui credit lines that have long-term relationships against inflation while the transmission mechanism of monetary policy through the channel of inflation expectations have short-term relationship strong. Keywords: The Transmission Mechanism Of Monetary Policy, Output Gap, Inflation.

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.

scholarly journals The Analysis of Monetary Transmission Mechaniscm by Expectation Patterns in Influencing the Inflation

2018 ◽  
Vol 6 (4) ◽  
pp. 412-419
Author(s):  
Ilma Ulfatul
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Inflation Targeting ◽  
Transmission Mechanism ◽  
Output Gap ◽  
Inflation Expectations ◽  
Short Term ◽  
Inflation Expectation ◽  
Policy Transmission ◽  
Monetary Policy Transmission Mechanism

Bank Indonesia set inflation targeting framework from 1 July 2005 by publicizing the inflation target or forward inflation to the public. However, the phenomenon show that most of the actual inflation of Indonesia is not in accordance with inflation targeting that have been set by Bank Indonesia. The purpose of this research is to analyze and know the flow of monetary policy transmission mechanism of expectation line in influencing inflation, to analyze and to know the influence of long-term and short-term and the shocks of interest rate, exchange rate, inflation expectations, output gap and GDP on inflation in Indonesia. The variables used in this research are BI Rate, Exchange Rate, Inflation Expectation, Output Gap, GDP and Inflation. The data used in this research is monthly data of time series from January 2006 until June 2016 which come from Bank Indonesia (BI) and Central Statistic Agency (BPS). The method used in this research is Vector Error Correction Model (VECM). The result of research indicates that: The flow of monetary policy transmission mechanism of expectation line in influencing inflation in Indonesia runs continuously with indicated the existence of two-way relationship between exchange rate and inflation variable, in the short term, the BI Rate, Exchange Rate and Output Gap are significant and positively affect inflation, inflation expectation variables are significant and affect inflation and GDP variable is insignificant to inflation in Indonesia, while in long run variable affecting inflation rate are BI Rate and inflation expectations, based on the variance decomposits result shows that the biggest variant contributing to inflation in Indonesia is the BI Rate.

scholarly journals Transmission Mechanism of Monetary Policy: Case Study of Interest Rate Channel in India

2018 ◽  
Vol 4 (02) ◽  
Author(s):  
Prakash Anant Salvi ◽  
Davinder Kaur Suri
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Real Economy ◽  
Policy Transmission ◽  
Pass Through ◽  
The Interest Rate ◽  
Interest Rate Channel

In India, prior to 1991, the tightly controlled interest rates caused impediments in the functioning of the interest rate channel of monetary policy transmission while after 1991, the RBI undertook various measures to strengthen the market-determination of interest rates. This paper has examined the evolution of the interest channel in India across the period 1985 to 2014 firstly by studying the interest rate pass-through using the Correlation matrix and the OLS technique and secondly, by studying the transmission of policy rates to the real economy using the reduced VAR model. The results show that the transmission of interest rates pass-through from policy rates to market interest rates (both - short-term as well as long-term) has strengthened while desired impact of long term market interest rates on industrial production and inflation appears to be weak.

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 The Unpleasant Arithmetic of the Taylor Rule

2020 ◽  
Vol 8 (3) ◽  
pp. p89
Author(s):  
Alejandro Rodriguez-Arana
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Phillips Curve ◽  
Taylor Rule ◽  
Independent Component ◽  
Elasticity Of Substitution ◽  
Interest Rate Rule

This paper analyzes the effect of a monetary policy that raises the reference interest rate in order to reduce inflation in a situation where the fiscal policy parameters remain constant. In an overlapping generation’s model and in the presence of an accelerationist Phillips curve and a Taylor rule of interest rates, it is observed that increasing the independent component of said rule leads to a solution that at least in a large number of cases is unstable. In the case where the elasticity of substitution is greater than one, inflation falls temporarily, but then it can increase in an unstable manner. One way to achieve stability is to establish an interest rate rule where Taylor’s principle is not met. However, in this case many times the increase in the independent component of this rule will generate greater long-term inflation.

scholarly journals Komparasi Jalur Moneter untuk Stabilitas Harga Dalam Kerangka Inflation Targeting Framework (Studi kasus pada interest rate, exchange rate dan credit channel)

2019 ◽  
Vol 8 (3) ◽  
pp. 181
Author(s):  
Setyo Tri Wahyudi ◽  
Rinny Apriliany Zakaria ◽  
Nurul Badriyah
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Interest Rates ◽  
Error Correction ◽  
Inflation Targeting ◽  
Correction Term ◽  
Secondary Data ◽  
Credit Channel ◽  
The Right

The monetary policy transmission mechanism has many ways in influencing inflation. This method became known as the monetary path. The use of appropriate channels in monetary policy will affect whether or not the objectives of the monetary policy are achieved. This study aims to determine which monetary path is appropriate for Indonesia, which is a developing country with an open economic system. The data used are secondary data taken from Bank Indonesia for the period 2005 to 2016. The research variables include inflation, BI-rate, credit interest rates (SBB), gross domestic product (GDP), exchange rate, bank reserve (BBR), and the amount of credit extended. This study focuses on the path of interest rates, exchange rates and bank credit using the Error Correction Model (ECM). The results of this study indicate that the right monetary path for Indonesia is the credit channel. This is because the value of the Error Correction Term (ECT) coefficient on the ECM model shows that the coefficient of the credit channel is smaller than the interest rate and exchange rate channel, which means that the imbalance that occurs can be resolved more quickly with the credit channel.

Monetary Policy Transmission Mechanism in Romania Over the Period 2001 to 2012

2019 ◽  
pp. 131-145
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Empirical Evidence ◽  
Transmission Mechanism ◽  
Communist Country ◽  
Monetary Policy Transmission ◽  
Policy Transmission ◽  
Emerging Country ◽  
Monetary Policy Transmission Mechanism ◽  
The Interest Rate

This chapter aims to provide additional empirical evidence on monetary policy transmission mechanism in Romania over the period 2001 to 2012 based on a BVAR analysis with a KoKo Minnesota/Litterman prior. The importance of the central bank is rising in Romania considering its main attribution to control the interest rate in accordance with its objectives. The empirical evidence provides a significant contribution to literature taking into account the characteristics of the selected emerging country, i.e. Romania, a former communist country in Central and Eastern Europe.

scholarly journals PERBANDINGAN EFEKTIVITAS MEKANISME TRANSMISI KEBIJAKAN MONETER ANTARA JALUR SUKU BUNGA DENGAN JALUR NILAI TUKAR TERHADAP SASARAN AKHIR INFLASI

Media Ekonomi ◽  
2019 ◽  
Vol 25 (1) ◽  
pp. 1
Author(s):  
Martin Simanjuntak ◽  
Budi Santosa
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Time Lag ◽  
Transmission Mechanism ◽  
Monetary Policy Transmission ◽  
Policy Transmission ◽  
Monetary Policy Transmission Mechanism ◽  
The Interest Rate ◽  
Interest Rate Channel

<em>This result discusses the effectiveness of the transmission mechanism of monetary policy by comparing the interest rate channel with the exchange rate channel towards the final inflation taget. </em><em>This study using regression method Vector Error Correction Model (VECM). In the study of this monetary policy transmission mechanism using secondary data based on monthly time series, namely from January 2011 to December 2015. The data is obtained from Bank Indonesia Financial Economic Statistics (SEKI).</em> <em>From the results of this research, the transmission mechanism of monetary policy exchange rate channel is more effective than monetary policy transmission mechanism interest rate channel; it is proven through the test impulse responses and variance decomposition test. In the exchange rate channel time lag until reach the final target of monetary policy (inflation) is 4 months while for the interest rate channel time lag until reach the final target of monetary policy is 5 months. RPUAB very suitable for use as an operational target in the monetary policy transmission mechanism cause rapid and strong response from RPUAB in responding the shock of monetary policy. RPUAB is the biggest variable that dominates the formation of inflation.</em>

scholarly journals Monetary policy special features in the context of low interest rates

2020 ◽  
Vol 2 ◽  
pp. 50-64
Author(s):  
Kristina Nesterova ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Price Level ◽  
Nominal Interest Rate ◽  
Inflation Target ◽  
Policy Rules ◽  
Monetary Policy Rules ◽  
Monetary Rules

Introduction. The paper considers a wide range of monetary policy rules: integral stabilization, NGDP targeting, price level targeting, raising the inflation target, introducing negative nominal interest rates etc. The author also considers discretionary policy used by central banks when the nominal rate is close to zero, such as dramatic preventive cut of the key interest rate and interventions in the open markets with the aim of cutting long-term interest rates. The relevance of this problem is supported by global long-term macroeconomic and demographic factors, such as the dynamics of oil prices and the aging of the population. The aim of the paper is to identify the most effective monetary policy rules in order to reduce the risk of a nominal interest rate falling to zero. Methods. Analysis of the background and the results of general equilibrium models modeling monetary policy is carried out. Analysis of the role of current global trends (based on statistics) in aggravating the problem of declining interest rates. Scientific novelty of the research. The author systematizes the conclusions of modern macroeconomic theory, which offers a number of monetary rules making it possible to reduce the likelihood of falling into the zero bound of interest rate. Results. The effectiveness of monetary rules such as targeting nominal GDP and price levels in preventing the nominal interest rate from falling to zero is shown, primarily due to more efficient public expectations management which is a weak point of discretionary intervention. Conclusions. Under the current global factors for many developed countries and some oil-exporters, the downward trend in nominal rates persists. Combined with slowdown in economic growth, such threat may have negative consequences for the Russian economy. In this case, it seems reasonable to stick to the inflation target above 2% per year and in the future to consider switching to targeting the price level or nominal GDP.

scholarly journals Analysis of Macroeconomics Stability Control of ICI Countries (Indonesia, China, India) Based on Transmission of Monetary Policy through Interest Rate Channel

2021 ◽  
Vol 8 (4) ◽  
pp. 226-234
Author(s):  
Annisa Anggreini Siswanto ◽  
Ahmad Albar Tanjung ◽  
Irsad Lubis
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Gross Domestic Product ◽  
Interest Rates ◽  
Domestic Product ◽  
Economic Stability ◽  
The Interest Rate ◽  
Transmission Of Monetary Policy ◽  
Interest Rate Channel

This study aims to analyze variable control of macroeconomic stability based on monetary policy transmission through interest rate channels in Indonesia, China, India (ICI). Variables used in the interest rate are rill interest rates, consumption, investment, gross domestic product, and inflation. This study used secondary data from 2000 to 2019. The results of the PVECM analysis through the interest rate channel show that the control of economic stability of the ICI country is carried out by investment variables and gross domestic product in the short term, while in the long run it is carried out by consumption, investment and gross domestic product. The results of the IRF analysis are the response stability of all variables is formed in the medium and long term periods. The results of the FEVD analysis show that there are variables that have the greatest contribution in the variable itself either in the short, medium, long term. The results of the interaction analysis of each variable transmission of monetary policy through interest rates can maintain and control the economic stability of the ICI country. Keywords: Interest Rate Channel, Interest Rate, Consumption, Investment, Gross Domestic Product, Inflation.

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