Central Bank Policy: Theory and Practice

Warjiyo, Perry; Juhro, Solikin M.

doi:10.1108/9781789737516

Cited by 30 publications

(32 citation statements)

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“…A growing body of literature suggests numerous technical approaches to define the extent of credible monetary policy. Warjiyo and Juhro (2019) define monetary policy credibility as the deviation of actual and targeted inflation. The larger the deviation of actual inflation from the target, the less credible the monetary policy.…”

Section: Empirical Strategymentioning

confidence: 99%

“…Equation (11) implies that tightening monetary policy (increased interest rate) leads to larger pessimism, and risk-averse behaviour reduces demand for credit, high loan loss provisions and a higher probability of the bubble to burst (Warjiyo & Juhro, 2019). In addition, higher interest rates imply Ó 2020 The Economic Society of Australia higher borrowing costs.…”

Section: Financial Instability Modelmentioning

confidence: 99%

“…Gambacorta (2009) also states that credible monetary policy has resulted in a protracted low‐interest‐rate episode that leads to an increase in banks’ risk‐taking behaviour, and accordingly promotes financial instability. Kim and Mehrotra (2015) assess the trade‐off between financial stability and price stability by looking at the interaction between financial stability and actual‐targeted inflation deviation—which can also be interpreted as monetary credibility (see Warjiyo & Juhro, 2019)—in Australia, Indonesia, Korea, New Zealand, Philippines and Thailand from 2000 to 2014. They find that about 12% of the observed country‐years are characterised by the trade‐off between monetary credibility and financial stability.…”

Section: Introductionmentioning

confidence: 99%

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Inflation and Financial Stability Trade‐off: Role of Monetary Policy Credibility and Fiscal Cyclicality

Kurnia

Izzulhaq

Maharda

et al. 2020

J of App Econs and Policy

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This paper examines the role of monetary credibility and fiscal cyclicality in generating the trade‐off between inflation rates and financial stability. We systematically develop simple theoretical models to shape the rationalisation framework, which demonstrates the role of fiscal cyclicality behaviour in arousing a trade‐off for the monetary policy to target low inflation rates and a stable financial system at the same time. By utilising the generalised method of moment (GMM), we find that a credible monetary policy generates a trade‐off between inflation and financial stability as long as the fiscal policy is procyclical.

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Section: Empirical Strategymentioning

confidence: 99%

Section: Financial Instability Modelmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Inflation and Financial Stability Trade‐off: Role of Monetary Policy Credibility and Fiscal Cyclicality

Kurnia

Izzulhaq

Maharda

et al. 2020

J of App Econs and Policy

View full text Add to dashboard Cite

show abstract

“…Since 1980, capital flows have been increasing and have been through several events, such as Asian Financial Crises (AFC) in 1998 and Global Financial Crises (GFC) in 2008. The size of capital flows can be counted by percentage to the GDP as table 1 below 1980-1989 1990-1999 2000-2007 2008 Warjiyo & Juhro (2016).…”

Section: Capitalmentioning

confidence: 99%

Analysis of Portfolio Investment in Indonesia Macroeconomy

Atyantodito

Firmansyah

2020

jejak

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This research examines the cause of portfolio flows in Indonesia and the effect of portfolio flows to the Indonesian economy based on monetary policy approach. By analyze the interactions among portfolio investment, global and domestic macroeconomy, and financial variables by employing a structural vector autoregression model, this study finds: 1) that both global and domestic factors play the role in driving the portfolio flows in Indonesia; 2) the portfolio flows play the role in driving the domestic financial market, by the order starts from asset prices, followed by exchange rate and lastly credit; 3) the portfolio flows play a role in driving the Indonesian economic growth. The percentage of the effect of portfolio is relatively large compared to the other variables, but in total, the percentage of portfolio flows in driving the economic growth is quite small. Nonetheless, the impulse response function result shows that the shock in portfolio flow can affect the economic growth.

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“…Policy Mix: Relationship between risk on Price and Financial System StabilityIt is necessary when Bank Indonesia formulates a policy mix to consider risk assessment on the price and financial system stability Warjiyo and Juhro (2017). have suggested that there are four combination possibilities of risk of the price stability and financial system stability, which could be a general guideline for implementing the policy mix.In a condition where the price stability is stable (inflation is in the band's target) and has a low credit growth (Quadrant I), policy makers can be accommodative and accommodate macroprudential and monetary policies.…”

mentioning

confidence: 99%

Strengthening the Role of Macroprudential Policies to Support a Sustainable Development. The Case of Indonesia

Hasan¹,

Hidayat²,

Dewanto³

2019

Proceedings of the 51st International Academic Conference, Vienna

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The external pressures on the domestic economic stability has prompted Bank Indonesia to focus on its monetary policy on the exchange rate measures. However, as part of the policy mix, the stance of monetary policy has been balanced with accommodative macroprudential policies to continue providing its support for the economic growth. Even though they have different targets and in their implementation there are potential conflicts that may occur when we try to achieve the objectives of both policies, the central bank deems a monetary policy and macroprudential policies to be complementary policies. This situation will provide a space for the macroprudential policies to encourage some kind of bank intermediation and to spur a credit growth. A policy support is needed to accelerate the credit growth to achieve its economic financing targets in the next 5 years, namely at 16% yoy. This study was aimed at identifying proper recommendations on the macroprudential policies such as encouraging a credit growth that included easing Loan to Value (LTV) ratios, targeting sectoral credit, easing the Macroprudential Intermediation Ratio (MIR), decreasing the Macroprudential Liquidity Buffer (MLB) ratios, easing the counter cyclical capital buffer (CCB) requirements, and strengthening coordination with other government agencies.

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Central Bank Policy: Theory and Practice

Cited by 30 publications

References 0 publications

Inflation and Financial Stability Trade‐off: Role of Monetary Policy Credibility and Fiscal Cyclicality

Inflation and Financial Stability Trade‐off: Role of Monetary Policy Credibility and Fiscal Cyclicality

Analysis of Portfolio Investment in Indonesia Macroeconomy

Strengthening the Role of Macroprudential Policies to Support a Sustainable Development. The Case of Indonesia

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