ASYMMETRIC TRANSMISSION OF MONETARY POLICY TO INTEREST RATES: EMPIRICAL EVIDENCE FROM INDONESIA

Fitri Ami Handayani · Febrio Nathan Kacaribu

9 citations0/0 files storedBulletin of Monetary Economics and Banking

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Monetary Policy and Economic Impact Banking stability, regulation, efficiency Market Dynamics and Volatility

Abstract

This study investigates monetary policy transmission to the interest rates in Indonesia, focusing on changes in pricing behavior that may have occurred after the shift of benchmark policy rates in August 19, 2016. We analyzed monthly data on money market, deposit, and lending rates from November 2011 to December 2019. Two specifications of the error correction model capture asymmetric adjustments. We find that the new policy rate regime has improved the response of money market rates. However, the rigidity of bank retail rates has increased. Specifically, lending rates have become more rigid upwards, as lenders have become more responsive to monetary easing than to monetary tightening.

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References

1981Credit Rationing in Markets with Imperfect Information 1992THE POWER OF COINTEGRATION TESTS 2020Country Responses and the Reaction of the Stock Market to COVID-19—a Preliminary Exposition 1994Testing for an unstable root in conditional and structural error correction models 2020COVID-19: Media coverage and financial markets behavior—A sectoral inquiry 2020Implications of COVID-19 Pandemic on the Global Trade Networks 2005Interest Rate Pass-Through: Empirical Results for the Euro Area 2020Hourly Oil Price Volatility: The Role of COVID-19

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