Missing Role of Central Bank on Monetary Transmission Mechanism Evidence From Indonesia

Authors

  • Mangasa Augustinus Sipahutar Sekolah Tinggi Ilmu Ekonomi Kesatuan

Keywords:

banks view, credit depth, economic growth, monetary transmission

Abstract

Abstract. This study provides evidence from Indonesia to understand whether Bank
Indonesia (BI) could promote economic growth and reducing both unemployment and
poverty. Based on model estimation and institutional relationship, there is trade off
between the role of BI in terms of exchange rate stability, price stability and inflation to
bank view. It is necessary to add the role of BI on bank view through the authority that
obligates banks mandatorily to implement monetary policy in the operational order as
credit channel. The addition role of BI in bank view has implications for ability of BI in
directing monetary policy comprehensively. With the addition of this role, banks become
an integral part of BI in every monetary policies. In addition, the Indonesian government
through the Ministry of State Owned Entreprises has the authority to intervene state
owned banks that dominate banking market nation wide to be more responsive to
macroeconomic and monetary policies.
Keywords: banks view, credit depth, economic growth, monetary transmission

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Published

2021-06-26