Financing Channel and Monetary Policy: Evidence from Islamic Banking in Indonesia

Muhamed Zulkhibri and Raditya Sukmana
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Raditya Sukmana: The Islamic Research and Teaching Institute (IRTI)

No 2016-1, Working Papers from The Islamic Research and Teaching Institute (IRTI)

Abstract: Using Indonesia Islamic banks data from 2003 to 2014, this paper employs panel regression methodology by investigating the responses of Islamic banks to changes in financing rate and monetary policy may differ, depending on their characteristics. The results suggest that the financing rate has negative impact on Islamic bank financing, while bank-specific characteristics have positive influence on Islamic bank financing. The degree of size and capital have greater impact than liquidity on Islamic bank financing. On the other hand, changes in monetary policy is insignificant on bank financing, which implies that the transmission of monetary policy through the Islamic segment of the banking sector is weak. Furthermore, the weak impact of monetary policy on bank financing can be explained by the dramatic expansion of Islamic banks during this sample period, which contributed to substantial increase in deposit growth and high liquidity position.

Keywords: Islamic Banks; Financing Rate; Financing Channels; Monetary Policy; Panel Regression (search for similar items in EconPapers)
JEL-codes: E44 E52 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2016-03-01
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-sea
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Citations: View citations in EconPapers (2)

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