The lending channel of monetary policy in Indonesia

Elis Naiborhu

Journal of Asian Economics, 2020, vol. 67, issue C

Abstract: This study evaluates the bank lending channel of monetary policy in Indonesia by using quarterly bank-level data over the period of 2005-2016. I find that the lending channel of monetary policy works for all banks, both large and small. The results suggest that higher capital buffers and better liquidity positions moderate the impact of changes in monetary policy on credit growth for large banks, while capital buffers and liquidity positions do not alter the strength of the lending channel for small banks. The findings indicate that the central bank can use prudential instruments affecting capital buffers and liquidity positions for managing the strength of adjustment in the monetary policy interest rate on bank credit growth.

Keywords: Lending growth; Monetary policy; Capital buffers; Liquidity (search for similar items in EconPapers)
JEL-codes: G21 G28 G32 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:67:y:2020:i:c:s1049007820300191

DOI: 10.1016/j.asieco.2020.101175

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