Financial Globalization and Bank Lending: The Limits of Domestic Monetary Policy

Cao, Jin; Dinger, Valeriya

doi:10.1017/s0022109022000539

Cited by 8 publications

(1 citation statement)

References 22 publications

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“…Several investment and policy concerns can also be highlighted for our choice of the Indonesian economy. From a policy point of view, since monetary policy spillovers from the core economies can substantially limit the effectiveness of domestic monetary policy in SOEs (Cao and Dinger, 2022), the effect of monetary policy spillovers from the US, if not well understood and managed could complicate domestic monetary policy challenges for Indonesia. This can endanger capital flows in the form of capital reversal or at least a sudden stop in capital inflows (see Deutsche Bundesbank, 2020Gajewski, Jara, Kanga, Mok, Moreno & Serwa, 2019.…”

Section: Introductionmentioning

confidence: 99%

Time-Varying Impact of US Monetary Policy Spillovers on Small Open Economies: Evidence from Indonesia

Saba,

Sanusi

2023

Preprint

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This study examines the impact of the US monetary policy spillover on Indonesia’s macroeconomic and financial variables using quarterly data for the period 2000–2020 for both domestic and US variables. We use the impulse responses obtained from an estimated Time-Varying VAR model with stochastic volatility to examine the response of real GDP, inflation, exchange rate, stock market return, and monetary policy rate to US monetary policy shock. We find that US monetary policy spillovers, on average, boost Indonesia’s real GDP, stock market returns, and bilateral exchange rate vis a vis the US Dollar but also trigger domestic inflation beyond what Indonesia’s policy reaction could counteract. However, there are considerable differences in the response of the variables to easing and tightening shocks, on the one hand, and conventional vs unconventional monetary policy, on the other. Finally, we found substantial time variation corresponding to major global events, including the Global Financial Crisis and implementation of unconventional monetary policy, the taper tantrum of 2013-2014, and the great lockdown in the wake of the Covid-19 pandemic in 2019-2020.

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Section: Introductionmentioning

confidence: 99%

Time-Varying Impact of US Monetary Policy Spillovers on Small Open Economies: Evidence from Indonesia

Saba,

Sanusi

2023

Preprint

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The effect of US monetary policy on Russian Banks in a low interest rate environment

Ivanova,

Styrin

2024

Emerging Markets Review

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Assessing the baseline model of WTI oil and stock returns under financial volatility and spillover effects

Attílio,

Mollick

2024

Energy Economics

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Financial Globalization and Bank Lending: The Limits of Domestic Monetary Policy

Abstract: Business School. We thank Jarrad Harford (the editor), an anonymous referee, Joshua Aizenman, Farooq Q. Akram,

Cited by 8 publications

References 22 publications

Time-Varying Impact of US Monetary Policy Spillovers on Small Open Economies: Evidence from Indonesia

Time-Varying Impact of US Monetary Policy Spillovers on Small Open Economies: Evidence from Indonesia

The effect of US monetary policy on Russian Banks in a low interest rate environment

Assessing the baseline model of WTI oil and stock returns under financial volatility and spillover effects

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