TRANSMISSION CHANNEL AND EFFECTIVENESS OF DUAL MONETARY POLICY IN INDONESIA
Keywords:
Monetary transmission mechanism, interest rate pass through, conventional banking, islamic banking
Abstract
This paper investigates the transmission mechanism of dual monetary system from conventional and Islamic policy rates to inflation and output. We apply Granger Causality and VAR methods on monthly data of Indonesian banking, during the period of January 2003 to December 2009. The result shows that conventional policy rate is transmitted to output and inflation, while Islamic policy rate are not. In addition, the shock of conventional interest rate, credit and interbank rate give a negative and permanent impacts on inflation and output, except for SBI (Certificate of Bank Indonesia) with positive impact to inflation though negatively affect the output. On the other hand, the shock of PLS, financing and Islamic interbank PLS, as well as SBIS (Central Bank Shariah Certificate) give positive and permanent impacts on inflation and output.
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References
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Qayyum Abdul, Sajawal Khan, andIdreesKhawaja. 2005. “Interest Rate Pass-Through in Pakistan: Evidence from Transfer Function Approach.” The Pakistan Development Review Vol.44 No.4 pp.975-1001.
Sakti, Ali. 2007. Sistem Ekonomi Islam: Jawaban atas Kekacauan Ekonomi Modern. Jakarta, Indonesia: Paradigma & Aqsa Publishing.
Siddiqui, Shamin Ahmad. 2008. “An Evaluation of Research on Monetary Policy and Stability of the Islamic Economic System.”“Paper. 7th International Conference on Islamic Economics: 30 Years of Research in Islamic Economics, Jeddah: KAAU-IRTI, April.
Sorensen, ChristofferKokand Thomas Werner. 2006. “Bank interest Rate Pass-Through in the Euro Area: A Cross Country Comparison.””ECB Working Paper Series No.580.
Sukmana, Raditya and Salina H. Kassim. 2010. “Roles of the Islamic Banks in the Monetary Transmission Process in Malaysia.” International Journal of Islamic and Middle Eastern Finance and Management, Vol. 3, No. 1.
Warjiyo, Perry and Juda Agung [Eds]. 2002. Transmission Mechanisms of Monetary Policy in Indonesia. Jakarta: Bank Indonesia.
Tieman, Alexander. 2004. “Interest Rate Pass-Through in Romania and Other Central European Economies.” IMF Working Paper No.WP/04/211.
Van Leuvensteijn, Michiel, ChristofferKok Sorensen, Jacob A. Bikker, and Adrian ARJM van Rixtel. 2008. “Impact of Bank Competition on the interest Rate Pass-Through in the Euro Area.”“ECB Working Paper Series No.885.
Alamsyah, Halim and Abdul Kadir Masyhuri. 2000. “Inflation Targeting Sebagai Kerangka Kerja Alternatif Bagi Kebijakan Moneter.”“Paper. Mimeo.
Ascarya. 2007. Akad dan Produk Bank Syariah. Jakarta, Indonesia: Rajawali Pers.
Ascarya. 2008. “Menuju Sinergi Optimal Kebijakan Moneter dalam Sistem Keuangan/Perbankan Ganda.”“Jurnal Ekonomi dan Bisnis Indonesia Vol.23, No.1.
Ascarya. 2009a. “Lessons Learned from Repeated Financial Crises: An Islamic Economic Perspective.”“Buletin Ekonomi Moneter dan Perbankan, Bank Indonesia, Vol.12, No.1.
Ascarya. 2009b. “The Determinants of Inflation under Dual Monetary System in Indonesia.”“Working Paper, Bank Indonesia.
Ascarya. 2009c. “Toward Optimum Synergy of Monetary Policy in Dual Financial/Banking System.”“Journal of Indonesian Economy and Business, Vol.24, No.1.
Ascarya. 2010. “Peran Perbankan Syariah dalamTransmisi Kebijakan Moneter Ganda di Indonesia.”“Iqtisodia, Republika, August 26.
Ascarya and Ali Sakti. 2008. “Comparing Monetary Policy Instruments under Dual Financial System: interest System vs. Profit-and-Loss Sharing System.”“Journal of Islamic Business and Economics, Vol. 2, No. 1, Yogyakarta: Laboratorium Ekonomi dan Bisnis Islam.
Ascarya, Ali Sakti, Noer A. Achsani, and Diana Yumanita. 2007. “Towards INTegrated Monetary Policy under Dual Financial System: interest System vs. Profit-and-Loss Sharing System.”“Working Paper, Bank Indonesia.
Ascarya and Diana Yumanita. 2009. “Formulasi Stabilitas Sistem Keuangan Ganda di Indonesia.”“Working Paper, Bank Indonesia.”
Ascarya, Heni Hasanah, and Noer A. Achsani. 2008.”“Perilaku Permintaan Uang dalam Sistem Moneter Ganda di Indonesia.”“Buletin Ekonomi, Moneter dan Perbankan Bank Indonesia Vol. 11, No. 1. Jakarta: Bank Indonesia.
Aydin, Halil Ibrahim. 2007. “Interest Rate Pass-Through in Turkey.” Central Bank of Turkey Working Paper.
‘Ayuniyyah, Qurroh, Noer A. Achsani, and Ascarya. 2010. “Analisis Pengaruh Instrumen Moneter Syariah dan Konvensional terhadap Pertumbuhan Sektor Riil di Indonesia.”“Iqtisodia, Republika, August 26.
Banerjee, Anindyaet al. 1998. “Error-Correction Mechanism Tests for Cointegration in a Single-Equation Framework.” Journal of Time Series Analysis Vol. 19 No. 3. Blackwell Publishers Ltd
Best, Robin. 2008. “An Introduction to Error Correction Models.” LectureNotes. Oxford Spring School for Quantitative Methods in Social Research.
Betancourt, Rocio, Hernando Vargas, and Norberto Rodriguez. 2008. “Interest Rate Pass-Through in Columbia.” Cuadernos de Economia Vol.45 (Mayo) pp.29-58.
Bredin, Don, Trevor Fitzpatrick, and Gerard O Reilly. 2001. “Retail interest Rate Pass-Through: The Irish Experience.” Technical Paper No.06/RT/01. Central Bank of Ireland.
Burgstaller, Johann. 2005. “Interest Rate Pass-Through Estimates from Vector Autoregressive Model.”“Mimeo.
Chapra, M. Umer. 1985. Towards a Just Monetary System. Leicester, UK: The Islamic Foundation.
Chapra, M. Umer. 1996. “Monetary Management in an Islamic Economy.”“Islamic Economic Studies Vol. 4, No. 1.
Chapra, M. Umer. 2000. “Why has Islamic Prohibited interest?”“Review of Islamic Economics, No. 9.
Choudhury, Masudul Alam. 1997. Money in Islam: A Study in Islamic Political Economy, London, UK: Routledge.
Chionis, Dionysiosand Costas A. Leon.2006. “Interest Rate Transmission in Greece: Did EMU Cause a Structural Break?” Journal of Policy Modeling No.28 pp.453-466.
Chmielewski, Tomasz. 2004. “Interest Rate Pass-Through in the Polish Banking Sector and Banking Specific Financial Disturbances.”“Mimeo. National Bank of Poland.
Crespo-Cuaresma, Jesus, Balazs Egert, and Thomas Reininger. 2004. “Interest Rate Pass-Through in New EU Member States: The Case of the Czech Republic, Hungary, and Poland.”“William Davidson Institute Working Paper No.671 May.
De Bondt, Gabe. 2002. “Retail Bank interest Rate Pass-Through: New Evidence at the Euro Area Level.” European Central Bank Working Paper Series No.136 April.
Direktorat Pengelolaan Moneter (DPM). 2006. Tinjauan Pelaksanaan OPT Era BI Rate dan Alternatif Penyempurnaannya.”“Kajian IKU. Bank Indonesia.
Egert, Balazs, Jesus Crespo-Cuaresma and Thomas Reininger. 2006. “Interest Rate Pass-Through in Central and Eastern Europe: Reborn from Ashes Merely to Pass Away?”“William Davidson Institute Working Paper No.851 November.
Enders, Walter. 2004. Applied Econometric Time Series. 2nd Edition. John Wiley & Sons. USA. Espinosa-Vega, Marco A. and Alessandro Rebucci. 2003. “Retail Bank interest Rate Pass-Through: Is Chile Atypical?”“IMF Working PaperNo.WP/03/112.
Gujarati, Damodar N. 2004. Basic Econometrics. 4th Edition. Mc.Graw-Hill.
Horvath, Csilla, Judit Kreko, and Anna Naszodi. 2005. “Interest Rate Pass-Through: The Case of Hungary.”“Mimeo.
International Islamic University Malaysia. 2002. International Conference on Stable and Just Global Monetary System: Viability of the Islamic Gold Dinar, Proceedings, International Islamic University Malaysia, Kuala Lumpur, August 19-20.
Islahi, Abdul Azim. 1997. Konsepsi Ekonomi Ibnu Taimiyah. Binailmu.
Karim, Adiwarman A. 2004. Sejarah Pemikiran Ekonomi Islam. Jakarta, Indonesia: Rajawali Pers.
Karim, Adiwarman A. 2007. Ekonomi Makro Islami. Jakarta, Indonesia: Rajawali Pers.
Khan, Muhammad Akram. 1999. An Introduction to Islamic Economics. KitabBhavan – New Delhi.
Keele, Luke and Suzanna De Boef. 2004. “Not Just for Cointegration: Error Correction Models with Stationary Data.”“http://www.nuffield.ox.ac.uk/Politics/papers.
Kwapil, Claudia and Johann Scharler. 2006. “Interest Rate Pass-Through, Monetary Policy Rules and Macroeconomic Stability.”“Oesterreichische Nationalbank Working Paper No.18.
Kobayashi, Teruyoshi. 2008. “Incomplete Monetary Pass-Through and Optimal Monetary Policy.” International Journal of Central Banking Vol.4 No.3 September.
Marotta, Giuseppe. 2007. “Structural Breaks in the Lending interest Rate Pass-Through and the Euro.” Mimeo. Dipartimento di Economia Politica, Università di Modena e Reggio Emilia, and CEFIN.
Meera, Ahamed Kameel M. 2004. The Theft of Nations: Returning to Gold. Subang Jaya, Malaysia: Pelanduk Publications.
Qayyum Abdul, Sajawal Khan, andIdreesKhawaja. 2005. “Interest Rate Pass-Through in Pakistan: Evidence from Transfer Function Approach.” The Pakistan Development Review Vol.44 No.4 pp.975-1001.
Sakti, Ali. 2007. Sistem Ekonomi Islam: Jawaban atas Kekacauan Ekonomi Modern. Jakarta, Indonesia: Paradigma & Aqsa Publishing.
Siddiqui, Shamin Ahmad. 2008. “An Evaluation of Research on Monetary Policy and Stability of the Islamic Economic System.”“Paper. 7th International Conference on Islamic Economics: 30 Years of Research in Islamic Economics, Jeddah: KAAU-IRTI, April.
Sorensen, ChristofferKokand Thomas Werner. 2006. “Bank interest Rate Pass-Through in the Euro Area: A Cross Country Comparison.””ECB Working Paper Series No.580.
Sukmana, Raditya and Salina H. Kassim. 2010. “Roles of the Islamic Banks in the Monetary Transmission Process in Malaysia.” International Journal of Islamic and Middle Eastern Finance and Management, Vol. 3, No. 1.
Warjiyo, Perry and Juda Agung [Eds]. 2002. Transmission Mechanisms of Monetary Policy in Indonesia. Jakarta: Bank Indonesia.
Tieman, Alexander. 2004. “Interest Rate Pass-Through in Romania and Other Central European Economies.” IMF Working Paper No.WP/04/211.
Van Leuvensteijn, Michiel, ChristofferKok Sorensen, Jacob A. Bikker, and Adrian ARJM van Rixtel. 2008. “Impact of Bank Competition on the interest Rate Pass-Through in the Euro Area.”“ECB Working Paper Series No.885.
Published
2012-03-30
How to Cite
Ascarya, A. (2012). TRANSMISSION CHANNEL AND EFFECTIVENESS OF DUAL MONETARY POLICY IN INDONESIA. Buletin Ekonomi Moneter Dan Perbankan, 14(3), 269-298. https://doi.org/10.21098/bemp.v14i3.405
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Buletin Ekonomi Moneter dan Perbankan / Bulletin of Monetary Economics and Banking is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
