ANALYSIS OF THE IMPACT OF MONETARY POLICY AND TRANSMISSION MECHANISMS ON ECONOMIC GROWTH IN INDONESIA: AN EMPIRICAL APPROACH USING VAR (VECTOR AUTOREGRESSION) MODEL
Keywords:
Monetary Policy, Transmission Mechanisms, Economic Growth, Indonesia, Vector Autoregression (VAR), Central Bank, Time Lags, External Factors, Policy Decisions.Abstract
This research investigates the intricate relationship between monetary policy, transmission mechanisms, and economic growth in Indonesia using an empirical approach employing the Vector Autoregression (VAR) model. In the ever-evolving landscape of global economics, the role of monetary policy in promoting stability and growth is pivotal, especially for emerging economies like Indonesia. The study delves into the specific context of Indonesia, a country that has experienced periods of economic growth amid challenges such as fluctuating inflation rates, exchange rates, and external shocks. The research explores how the central bank, Bank Indonesia, employs monetary policy tools to navigate these challenges and assesses the impact of these policies on the nation's economic growth. Furthermore, it examines the transmission mechanisms propagating these effects, including interest rates, exchange rates, and bank lending. It also scrutinizes the presence of time lags, the magnitude and direction of these effects, and the influence of external factors. The findings of this study are expected to have significant implications for policymakers, central banks, investors, and the broader academic community. Understanding monetary policy dynamics in a globalized world marked by economic volatility is critical for making informed policy decisions.
References
Alagidede, P., & Ibrahim, M. (2017). On the causes and effects of exchange rate volatility on economic growth: Evidence from Ghana. Journal of African Business, 18(2), 169-193.
Antonakakis, N., Chatziantoniou, I., & Filis, G. (2017). Oil shocks and stock markets: Dynamic connectedness under the prism of recent geopolitical and economic unrest. International Review of Financial Analysis, 50, 1-26.
Bernerth, J. B., Cole, M. S., Taylor, E. C., & Walker, H. J. (2018). Control variables in leadership research: A qualitative and quantitative review. Journal of Management, 44(1), 131-160.
Borgonovo, E. (2023). Sensitivity analysis. Tutorials in Operations Research: Advancing the Frontiers of OR/MS: From Methodologies to Applications, 52-81.
D’Amato, G., Holgate, S. T., Pawankar, R., Ledford, D. K., Cecchi, L., Al-Ahmad, M., ... & Annesi-Maesano, I. (2015). Meteorological conditions, climate change, new emerging factors, and asthma and related allergic disorders. A statement of the World Allergy Organization. World Allergy Organization Journal, 8, 1-52.
Devonald, M., & Jones, N. (2023). Analysing Adolescent Education and Health Trajectories in Crisis Contexts: Examples From a Multi-Year Longitudinal Cross-Country Study. International Journal of Qualitative Methods, 22, 16094069231153611.
Diffenbaugh, N. S., & Burke, M. (2019). Global warming has increased global economic inequality. Proceedings of the National Academy of Sciences, 116(20), 9808-9813.
Dikau, S., & Volz, U. (2018). Central banking, climate change, and green finance.
Duskobilov, U. (2017). Impact of economic regulation through monetary policy: Impact analysis of monetary policy tools on economic stability in Uzbekistan. International Journal of Innovation and Economic Development, 3(5), 65-69.
Egbetokun, A., Atta-Ankomah, R., Jegede, O., & Lorenz, E. (2016). Firm-level innovation in Africa: overcoming limits and constraints. Innovation and Development, 6(2), 161-174.
Elwert, F., & Winship, C. (2014). Endogenous selection bias: The problem of conditioning on a collider variable. Annual review of sociology, 40, 31-53.
Galí, J. (2015). Monetary policy, inflation, and the business cycle: an introduction to the new Keynesian framework and its applications. Princeton University Press.
Gray, D. E. (2021). Doing research in the real world. Doing research in the real world, 1-100.
Haas, E. J., & Yorio, P. (2016). We are exploring the state of health and safety management system performance measurement in mining organizations. Safety Science, 83, 48-58.
Handayani, H. H., Estoque, R. C., & Murayama, Y. (2018). Estimation of built-up and green volume using geospatial techniques: A case study of Surabaya, Indonesia. Sustainable cities and society, 37, 581-593.
Hassani, H., & Yeganegi, M. R. (2020). Selecting optimal lag order in Ljung–Box test. Physica A: Statistical Mechanics and its Applications, 541, 123700.
He, L., Sopjani, L., & Laurenti, R. (2021). User participation dilemmas in the circular economy: An empirical study of Scandinavia's largest peer-to-peer product sharing platform. Sustainable Production and Consumption, 27, 975-985.
Jain, M., Khalil, S., Johnston, W. J., & Cheng, J. M. S. (2014). The performance implications of power–trust relationship: The moderating role of commitment in the supplier–retailer relationship. Industrial Marketing Management, 43(2), 312-321.
Juhro, S. M. (2015). The role of the central bank in promoting sustainable growth: Perspectives on implementing flexible ITF in Indonesia. Afro Eurasian Studies, 4(1), 23-61.
Kaplan, G., Moll, B., & Violante, G. L. (2018). Monetary policy, according to HANK. American Economic Review, 108(3), 697-743.
Kurniawan, R., & Managi, S. (2018). Economic growth and sustainable development in Indonesia: an assessment. Bulletin of Indonesian Economic Studies, 54(3), 339-361.
Lee, O. K. D., Choi, B., & Lee, H. (2020). How do knowledge management resources and capabilities pay off in the short term and long term? Information & Management, 57(2), 103166.
Meiksin, A. (2020). Dynamics of COVID-19 transmission including indirect transmission mechanisms: a mathematical analysis. Epidemiology & Infection, 148.
Miranda-Agrippino, S., & Ricco, G. (2021). The transmission of monetary policy shocks. American Economic Journal: Macroeconomics, 13(3), 74-107.
Powell, J. H. (2020). Opening remarks: New economic challenges and the fed’s monetary policy review. In Proceedings-Economic Policy Symposium-Jackson Hole (pp. 1-18). Federal Reserve Bank of Kansas City.
Ricciardi, F., Zardini, A., Czakon, W., Rossignoli, C., & Kraus, S. (2022). Revisiting the cooperation–competition paradox: A configurational approach to short-and long-term coopetition performance in business networks. European Management Journal, 40(3), 320-331.
Rostagno, M., Altavilla, C., Carboni, G., Lemke, W., Motto, R., Guilhem, A. S., & Yiangou, J. (2019). A tale of two decades: the ECB's monetary policy at 20.
Saraswati, B. D., Maski, G., Kaluge, D., & Sakti, R. K. (2020). The effect of financial inclusion and financial technology on the effectiveness of the Indonesian monetary policy. Business: Theory and Practice, 21(1), 230-243.
Sarfi, M., Darvishi, M., Zohouri, M., Nosrati, S., & Zamani, M. (2021). Google’s University? An exploration of academic influence on the tech giant's propaganda. Journal of Cyberspace Studies, 5(2), 181-202.
Setyowati, A. B. (2023). Governing sustainable finance: insights from Indonesia. Climate Policy, 23(1), 108-121.
Silverman, B. W. (2018). Density estimation for statistics and data analysis. Routledge.
Silvia, E., Sihotang, N. V., & Sihotang, D. (2023). Causality Analysis of Inflation and Economic Growth Using the Error Correction Model (ECM). Indonesia Accounting Research Journal, 11(1), 23-36.
Siqueira, H., Macedo, M., Tadano, Y. D. S., Alves, T. A., Stevan Jr, S. L., Oliveira Jr, D. S., ... & Converti, A. (2020). Selection of temporal lags for predicting river flow series from hydroelectric plants using variable selection methods. Energies, 13(16), 4236.
Spong, K. (2017). Banking Regulation.
Stock, J. H., & Watson, M. W. (2016). Dynamic factor models, factor-augmented vector autoregressions, and structural vector autoregressions in macroeconomics. In Handbook of Macroeconomics (Vol. 2, pp. 415-525). Elsevier.
Teng, Z., He, Y., & Qiao, Z. (2023). Exploring the synergistic effects of digitalization and economic uncertainty on environmental sustainability: An investigation from China. Sustainability, 15(15), 11997.
Theofanidis, D., & Fountouki, A. (2018). Limitations and delimitations in the research process. Perioperative Nursing-Quarterly scientific, online official journal of GORNA, 7(3 September-December 2018), 155-163.
Ugwu, F. I. P., & Njeze, V. A. (2023). Monetary Policy Transmission Mechanisms and Economic Growth in Nigeria: An Empirical Investigation (1999-2021). Global Journal of Finance and Business Review| ISSN, 1694, 450X.
Wurst, S. N., Gerlach, T. M., Dufner, M., Rauthmann, J. F., Grosz, M. P., Küfner, A. C., ... & Back, M. D. (2017). Narcissism and romantic relationships: The differential impact of narcissistic admiration and rivalry. Journal of Personality and Social Psychology, 112(2), 280.
Xiao, K. (2020). Monetary transmission through shadow banks. The Review of Financial Studies, 33(6), 2379-2420.
Downloads
Published
Issue
Section
License
Copyright (c) 2023 INTERNATIONAL JOURNAL OF ECONOMIC LITERATURE
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
INTERNATIONAL JOURNAL OF ECONOMIC LITERATURE © 2023 by Adisam Publisher is licensed under CC BY-SA 4.0
