The Regional Impact of Monetary Policy in Indonesia
AbstractThis paper employs Vector Autoregression (VAR) models to measure the impact of monetary policy shocks on regional output in Indonesia. Having incorporated a possible structural break following the aftermath of the 1997-98 Asian Crisis, the impulse response functions derived from the estimated models reveal substantial cross-region variations in policy responses in terms of their magnitude and timing. Our work complements the existing literature by providing insights from a developing country. The results support previous findings that the differential regional effects of monetary policy are significantly related to sectoral composition (especially the share of manufacturing), providing evidence for the relevance of the interest rate channel of monetary policy. We also find that firm-size contributes to the differences, providing evidence for the relevance of the credit channel.
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Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 11-081/3.
Date of creation: 16 May 2011
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Web page: http://www.tinbergen.nl
monetary policy transmission; regional development; vector autoregression;
Find related papers by JEL classification:
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
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