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Effectiveness of monetary policy transmission in Indonesia

Author

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  • Muhammad Khoirul Fuddin

Abstract

This study discusses the channel of monetary policy transmission mechanism of money, credit, interest rate and exchange rate in Indonesia. The effectiveness of the transmission mechanism of monetary policy in Indonesia can be described and explained by the ultimate target object in Indonesia, specifically economic growth and inflation. The analytical tool used in this study is Vector Error Correction Model (VECM) which uses impulse response and variance decomposition in determining the effectiveness of monetary policy transmission mechanism. The results explain that the credit channel is considered effective in explaining economic growth and the interest rate channel is effective in explaining inflation found in Indonesia.

Suggested Citation

  • Muhammad Khoirul Fuddin, 2014. "Effectiveness of monetary policy transmission in Indonesia," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 6(2), pages 119-130.
    • Handle: RePEc:uii:journl:v:6:y:2014:i:2:p:119-130:id:4135
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    File URL: https://journal.uii.ac.id/JEP/article/view/4135/3684
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    Cited by:

    1. Jaka Sriyana, 2018. "Inflationary effects of fiscal and monetary policies in Indonesia," Business and Economic Horizons (BEH), Prague Development Center, vol. 14(3), pages 674-688, June.
    2. Apanisile, Tolulope Olumuyiwa & Akinlo, Anthony Enisan, 2022. "Effectiveness of Monetary Policy Transmission Mechanism in an Implicit Inflation Targeting Regime: The Case of Nigeria," African Journal of Economic Review, African Journal of Economic Review, vol. 10(4), September.

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