IDEAS home Printed from https://ideas.repec.org/a/idn/journl/v19y2017i3ap267-286.html
   My bibliography  Save this article

The Role Of Interest Rates And Provincial Monetary Aggregate In Maintaining Inflation In Indonesia

Author

Listed:
  • Chandra Utama

    (Parahyangan Catholic University)

  • Miryam B.L. Wijaya

    (Parahyangan Catholic University)

  • Charvin Lim

    (Parahyangan Catholic University)

Abstract

Inflation is a regional phenomenon hence the use of provincial data might be more appropriateon explaining the relationship between monetary policy and inflation. This paper analyzes the impact of changes in provincial money supply, the policy rate, and the interbank rate on regional inflation, within the framework of Hybrid New Keynesian Phillips Curve (HNKPC). This paper employs Generalized Method of Moments (GMM) on panel data of 32 provinces from 2005-III to 2014-IV. The estimation result shows that provincial monetary aggregate influence inflation significantly only in Sumatera. Furthermore, the policy fate affects the inflation in Sumatera and Kalimantan-Sulawesi. Using the interbank money rate, the result shows this rate also affect the inflation in most of the region except Kalimantan-Sulawesi. These findings show the price-based policy is more significant on affecting the provincial inflation compared to the provincial money supply.

Suggested Citation

  • Chandra Utama & Miryam B.L. Wijaya & Charvin Lim, 2017. "The Role Of Interest Rates And Provincial Monetary Aggregate In Maintaining Inflation In Indonesia," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 19(3), pages 267-286, January.
    • Handle: RePEc:idn:journl:v:19:y:2017:i:3a:p:267-286
    DOI: https://doi.org/10.21098/bemp.v19i3.666
    as

    Download full text from publisher

    File URL: https://bulletin.bmeb-bi.org/cgi/viewcontent.cgi?article=1156&context=bmeb
    Download Restriction: no
    File URL: https://libkey.io/https://doi.org/10.21098/bemp.v19i3.666?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Masagus M. Ridhwan & Henri L. F. Groot & Piet Rietveld & Peter Nijkamp, 2014. "The Regional Impact of Monetary Policy in Indonesia," Growth and Change, Wiley Blackwell, vol. 45(2), pages 240-262, June.
    2. John B. Taylor, 1995. "The Monetary Transmission Mechanism: An Empirical Framework," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 11-26, Fall.
    3. Kate Phylaktis & David Blake, 1993. "The fisher hypothesis: Evidence from three high inflation economies," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 129(3), pages 591-599, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Harry Aginta & Masakazu Someya, 2022. "Regional economic structure and heterogeneous effects of monetary policy: evidence from Indonesian provinces," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 11(1), pages 1-25, December.
    2. Ageliki Anagnostou & Stephanos Papadamou, 2012. "The effects of Monetary Policy shocks across the Greek Regions," ERSA conference papers ersa12p507, European Regional Science Association.
    3. R. Santos Alimi, 2014. "ARDL Bounds Testing Approach to Cointegration: A Re-Examination of Augmented Fisher Hypothesis in an Open Economy," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 2(2), pages 103-114, June.
    4. Utku ALTUNÖZ, 2018. "Investigating the Presence of Fisher Effect for the China Economy," Sosyoekonomi Journal, Sosyoekonomi Society, issue 26(35).
    5. Carlo Altavilla, 2003. "Assessing monetary rules performance across EMU countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 8(2), pages 131-151.
    6. Ben Mimoun, Mohamed & Boukhatem, Jamel & Raies, Asma, 2024. "Aggregate demand and inflation response to monetary policy shocks in Tunisia," Journal of Policy Modeling, Elsevier, vol. 46(3), pages 592-612.
    7. Scheffknecht, Lukas & Geiger, Felix, 2011. "A behavioral macroeconomic model with endogenous boom-bust cycles and leverage dynamcis," FZID Discussion Papers 37-2011, University of Hohenheim, Center for Research on Innovation and Services (FZID).
    8. Ayşegül Ladin SÜMER, 2020. "Optimal Taylor rule in the new era central banking perspective," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(1(622), S), pages 159-170, Spring.
    9. Liu, Kerry, 2019. "The determinants of China's lending rates and interest rates pass-through: A cointegration analysis," Research in Economics, Elsevier, vol. 73(1), pages 66-71.
    10. Michaelides, Panayotis G. & Belegri-Roboli, Athena & Economakis, George & Milios, John G., 2005. "The Determinants of Investment Activity in Greece (1960-’99)," MPRA Paper 74548, University Library of Munich, Germany.
    11. Blanco, Emilio & Elosegui, Pedro & Izaguirre, Alejandro & Montes-Rojas, Gabriel, 2019. "Regional and state heterogeneity of monetary shocks in Argentina," The Journal of Economic Asymmetries, Elsevier, vol. 20(C).
    12. Dina Cakmur Yildirtan & Selin Sarili, 2017. "Panel Data Analysis of Monetary Transmission Mechanism for European Union Countries," Journal of Social Science Studies, Macrothink Institute, vol. 4(2), pages 42-56, July.
    13. Stephan Schulmeister, 2000. "Technical Analysis and Exchange Rate Dynamics," WIFO Studies, WIFO, number 25857, August.
    14. Jahan Abdul Raheem & Gazi M. Hassan & Mark J. Holmes, 2023. "The Impact of Remittances on Monetary Transmission Mechanism in Remittance-recipient Countries: with Focus on Credit and Exchange Rate Channels," Working Papers in Economics 23/06, University of Waikato.
    15. Rupert, Peter & Šustek, Roman, 2019. "On the mechanics of New-Keynesian models," Journal of Monetary Economics, Elsevier, vol. 102(C), pages 53-69.
    16. Christopher L. Gilbert, 2010. "How to Understand High Food Prices," Journal of Agricultural Economics, Wiley Blackwell, vol. 61(2), pages 398-425, June.
    17. Shu Wu & Shigeru Iwata, 2004. "Estimating Monetary Policy Effects When Interest Rates are Bounded at Zero," Econometric Society 2004 Far Eastern Meetings 478, Econometric Society.
    18. Allan H. Meltzer, 2014. "Slow Recovery with Low Inflation," Book Chapters, in: Martin Neil Baily & John B. Taylor (ed.), Across the Great Divide: New Perspectives on the Financial Crisis, chapter 8, Hoover Institution, Stanford University.
    19. repec:hal:spmain:info:hdl:2441/5221 is not listed on IDEAS
    20. Jean Louis EKOMANE, 2017. "Monetary policy transmission: Does the credit channel perform in Cameroon?," Turkish Economic Review, KSP Journals, vol. 4(4), pages 369-377, December.
    21. César Calderón & Roberto Duncan & Klaus Schmidt-Hebbel, 2016. "Do Good Institutions Promote Countercyclical Macroeconomic Policies?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 78(5), pages 650-670, October.

    More about this item

    Keywords

    Monetary policy; regional inflation; hybrid NKPC;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • R19 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Other

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:idn:journl:v:19:y:2017:i:3a:p:267-286. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lutzardo Tobing or Jimmy Kathon (email available below). General contact details of provider: https://edirc.repec.org/data/bigovid.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.