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Monetary Policy Transmission Using Auto Regressive Distributed Lag (ARDL) Model: Case Of Indonesia
(2016-12-08) DUDI DERMAWAN SAPUTRA; Sumarno Zain; Rina Indiastuti
Since July 2005, Inflation Targeting Framework (ITF) policy has been adopted by Bank Indonesia through its monetary policy. In the ITF policy, Bank Indonesia announced the target of inflation and its monetary policy is aimed to achieve the determined target of inflation. The direction of the monetary policy will be reflected in the determination of policy rate (BI Rate). In this research, we studied the influence of monetary policy transmission in both Islamic and conventional banking used Auto Regressive Distributed Lag (ARDL) model. Based on the results of ARDL Model, in a long run, the models indicated that Interbank Money Market Overnight interest rates had a negative relationship with the lending bank (Islamic and conventional). In this model, if the interest rates rise by 1%, loan distribution will drop by -0.181432%. In a short run, the model used was the Error Correction Model (ECM). ECM coefficient was negative and significant at the 5% level, as much as -0.031682, confirming the existence of long-term relationships between the variables.