ASYMMETRIC TRANSMISSION OF MONETARY POLICY TO INTEREST RATES: EMPIRICAL EVIDENCE FROM INDONESIA

Fitri Ami Handayani () and Febrio Kacaribu
Additional contact information
Fitri Ami Handayani: University of Indonesia

Bulletin of Monetary Economics and Banking, 2021, vol. 24, issue 1, 119-150

Abstract: This study investigates monetary policy transmission to the interest rates in Indonesia, focusing on changes in pricing behavior that may have occurred after the shift of benchmark policy rates in August 19, 2016. We analyzed monthly data on money market, deposit, and lending rates from November 2011 to December 2019. Two specifications of the error correction model capture asymmetric adjustments. We find that the new policy rate regime has improved the response of money market rates. However, the rigidity of bank retail rates has increased. Specifically, lending rates have become more rigid upwards, as lenders have become more responsive to monetary easing than to monetary tightening.

Keywords: Monetary policy; Asymmetric adjustment; Indonesia (search for similar items in EconPapers)
JEL-codes: C22 E43 G21 (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://bulletin.bmeb-bi.org/cgi/viewcontent.cgi?article=1022&context=bmeb (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:24:y:2021:i:1f:p:119-150

DOI: 10.21098/bemp.v24i1.1201

Access Statistics for this article

Bulletin of Monetary Economics and Banking is currently edited by Paresh Narayan

More articles in Bulletin of Monetary Economics and Banking from Bank Indonesia Contact information at EDIRC.
Bibliographic data for series maintained by Lutzardo Tobing ( this e-mail address is bad, please contact ) and Jimmy Kathon ().