RISK BEHAVIOR IN THE TRANSMISSION MECHANISM OF MONETARY POLICY IN INDONESIA
This study explores interconnections between risk behaviour in the financial sector, particularly banking sector, with monetary policy stance. Referring Bernanke and Blinder (1988) modified model for analyzing the bank credit behavior, we develop an empirical model to test the role of risk behaviour...
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doaj-a71932ad5a9d4a8d8c99eb2244f0cd732020-11-25T01:16:19ZindBank IndonesiaBulletin Ekonomi Moneter dan Perbankan1410-80462460-91962011-05-0113324327010.21098/bemp.v13i3.393393RISK BEHAVIOR IN THE TRANSMISSION MECHANISM OF MONETARY POLICY IN INDONESIADoni SatriaSolikin M. JuhroThis study explores interconnections between risk behaviour in the financial sector, particularly banking sector, with monetary policy stance. Referring Bernanke and Blinder (1988) modified model for analyzing the bank credit behavior, we develop an empirical model to test the role of risk behaviour in monetary policy transmission mechanism. Vector Error Correction Model are applied to test the significance of interaction between risk variables and monetary policy stance in the short run dynamics of credit behavior around its long-run cointegration with real GDP. Some empirical results emerge from this preliminary study. First, there is early indication that risk taking channel in the monetary policy transmission mechanism exists in Indonesia during analysis period. Second, risk variables and credit tend to move procyclicalyl while monetary policy stance tends to a-cyclical. Third, pro-cyclical behavior of credit and risk variables reverses the effect of loose monetary policy stance, and there is an indication of asymmetric effect between tight monetary policy and loose monetary policy in Indonesian economy. These empirical findings bring about policy recommencations for better understanding on the risk behavior in the banking sector, as well as integration beetween monetary dan financial sector policies. JEL Code : E52, E58, Keyword: Monetary Policy Transmission Mechanism, Monetary Policy Stance, Banking Risk Behavior, Risk Perceptionhttps://www.bmeb-bi.org/index.php/BEMP/article/view/393 |
collection |
DOAJ |
language |
Indonesian |
format |
Article |
sources |
DOAJ |
author |
Doni Satria Solikin M. Juhro |
spellingShingle |
Doni Satria Solikin M. Juhro RISK BEHAVIOR IN THE TRANSMISSION MECHANISM OF MONETARY POLICY IN INDONESIA Bulletin Ekonomi Moneter dan Perbankan |
author_facet |
Doni Satria Solikin M. Juhro |
author_sort |
Doni Satria |
title |
RISK BEHAVIOR IN THE TRANSMISSION MECHANISM OF MONETARY POLICY IN INDONESIA |
title_short |
RISK BEHAVIOR IN THE TRANSMISSION MECHANISM OF MONETARY POLICY IN INDONESIA |
title_full |
RISK BEHAVIOR IN THE TRANSMISSION MECHANISM OF MONETARY POLICY IN INDONESIA |
title_fullStr |
RISK BEHAVIOR IN THE TRANSMISSION MECHANISM OF MONETARY POLICY IN INDONESIA |
title_full_unstemmed |
RISK BEHAVIOR IN THE TRANSMISSION MECHANISM OF MONETARY POLICY IN INDONESIA |
title_sort |
risk behavior in the transmission mechanism of monetary policy in indonesia |
publisher |
Bank Indonesia |
series |
Bulletin Ekonomi Moneter dan Perbankan |
issn |
1410-8046 2460-9196 |
publishDate |
2011-05-01 |
description |
This study explores interconnections between risk behaviour in the financial sector, particularly banking sector, with monetary policy stance. Referring Bernanke and Blinder (1988) modified model for analyzing the bank credit behavior, we develop an empirical model to test the role of risk behaviour in monetary policy transmission mechanism. Vector Error Correction Model are applied to test the significance of interaction between risk variables and monetary policy stance in the short run dynamics of credit behavior around its long-run cointegration with real GDP. Some empirical results emerge from this preliminary study. First, there is early indication that risk taking channel in the monetary policy transmission mechanism exists in Indonesia during analysis period. Second, risk variables and credit tend to move procyclicalyl while monetary policy stance tends to a-cyclical. Third, pro-cyclical behavior of credit and risk variables reverses the effect of loose monetary policy stance, and there is an indication of asymmetric effect between tight monetary policy and loose monetary policy in Indonesian economy. These empirical findings bring about policy recommencations for better understanding on the risk behavior in the banking sector, as well as integration beetween monetary dan financial sector policies.
JEL Code : E52, E58,
Keyword: Monetary Policy Transmission Mechanism, Monetary Policy Stance, Banking Risk Behavior, Risk Perception |
url |
https://www.bmeb-bi.org/index.php/BEMP/article/view/393 |
work_keys_str_mv |
AT donisatria riskbehaviorinthetransmissionmechanismofmonetarypolicyinindonesia AT solikinmjuhro riskbehaviorinthetransmissionmechanismofmonetarypolicyinindonesia |
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1725150234025132032 |