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Alternative Of Monetary Policy Indicator: Panel Data Analysis From Islamic Banks In Malaysia

Author

Listed:
  • Zuriyati Ahmad

    (Universiti Teknologi MARA)

  • Abdul Ghafar Ismail

    (Professor of Banking and Financial Economics and Chairperson Organization of Islamic Economic Studies and Thoughts Organization of Islamic Economic Studies and Thoughts)

Abstract

The monetary policy indicators such as monetary aggregates, interest rates andMonetary Condition Index (MCI) are the traditional monetary policy indicatorsused in order to obtain early indication of the impact of monetary policy. Theseindicators could function as appropriate monetary policy indicators that will provideinformation to the monetary policy makers. The development in Islamic financialsystem however creates a challenge to find a monetary policy indicator, which is inconformity with Islamic teaching. Therefore, this paper is aimed to examine the futuregrowth of nominal GDP as an alternative variable for monetary policy indicator inIslamic monetary system. The investigation will benefit from data of 17 Islamic banksin Malaysia which implement full fledge or Islamic windows scheme spanning from2005 to 2010. GMM system method is used to analyze the data in hope to validatethe appropriateness of the alternative monetary policy indicator. The result suggeststhat the future growth of nominal GDP is significant as monetary policy indicator andcould be applied by the central bank in implementing the monetary policy especiallyin the dual banking system.

Suggested Citation

  • Zuriyati Ahmad & Abdul Ghafar Ismail, 2018. "Alternative Of Monetary Policy Indicator: Panel Data Analysis From Islamic Banks In Malaysia," Journal of Islamic Monetary Economics and Finance, Bank Indonesia, vol. 4(2), pages 279-292, November.
    • Handle: RePEc:idn:jimfjn:v:4:y:2018:i:2e:p:279-292
    DOI: https://doi.org/10.21098/jimf.v4i2.1017
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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