Interest Rate Volatility of the Federal Funds Rate: Response of the Bank Indonesia and its Impact on the Indonesian Economic Stability

Mukhlis, Imam; Hidayah, Isnawati; Retnasih, Nora Ria

doi:10.2478/jcbtp-2020-0007

Cited by 11 publications

(5 citation statements)

References 15 publications

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“…Within this framework, movements in the BI rate are intrinsically linked to inflationary conditions. Mukhlis (2020) amplifies this point by identifying a strong relationship between FFR and the Consumer Price Index-a key component in calculating inflation. This means that FFR indirectly wields influence over the BI rate through its impact on inflation, reaffirming the role of ITF as the architectural backbone of monetary policy decisions.…”

Section: Resultsmentioning

confidence: 97%

Federal Funds Rate Spillover Effect On Emerging Market Banking Liquidity And Capital – Evidence From Indonesia

Ridho

2023

Bus. Management Analysis J.

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This paper examines the spillover effect of the fed fund rate (FFR) on emerging banking liquidity and capital in emerging markets, especially in Indonesia, using the Structural Equation Model (SEM). Data were collected from the Indonesia Central Bank and Financial Services Authority. Our model reveals a significant indirect negative relationship between FFR, banking liquidity, and capital. This relationship was examined both directly and indirectly using the model. While the FFR influence was robust, the impact on liquidity and capital was translated through the local bank rates. It is found that rising interest rates would still result in tighter liquidity to some extent. FFR also impacts capital decisions because the rising interest rate might incentivize managers to borrow from a lower market environment. Thus, observing the indirect relationship, the impact of the FFR depends on the local central bank monetary policy transmission to mitigate the spillover effect resulting from developed economy monetary policy.

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Section: Resultsmentioning

confidence: 97%

Federal Funds Rate Spillover Effect On Emerging Market Banking Liquidity And Capital – Evidence From Indonesia

Ridho

2023

Bus. Management Analysis J.

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“…Financial transactions conducted through banks can accelerate the process of financial circulation from the Bank into real-sector economic activities so that economic growth can occur. The financial sector can play an important role in the implementation of the intermediary function needed for the stability of a country's economy [6,7].…”

Section: Literature Reviewmentioning

confidence: 99%

“…In this case, research conducted by Mukhlis et al [7] provides information on the importance of the role of Bank Indonesia in maintaining stability to anticipate the dynamic global economic constellation. One of the monetary policy instruments that can be implemented is the determination of the BI rate.…”

Section: Literature Reviewmentioning

confidence: 99%

Recall the Impact of the Covid – 19 Virus in Indonesia: Regional Perspective

Mukhlis

Pratama

2022

JEMT

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The Covid-19 virus has brought about fundamental changes to economic activity both on a macro and micro scale. The COVID-19 virus is a global epidemic that affects global, national, and regional economic stability. This article is a type of opinion article, the purpose of this study is to describe and review the state of the Indonesian economy on a regional scale at the time of the Covid-19 outbreak in Indonesia. Research objects include; Malang City, Malang Regency, and Batu City, East Java Province. This type of research is exploratory and data analysis method using descriptive analysis. The sampling method was carried out using a simple random sampling method for groups of farmers, Micro, Small, and Medium Enterprises, informal workers, and the household sector. The types of data used are primary data and secondary data. The results of the study show that each area analyzed tends to have the same results in several indicators, some economic indicators tend to decline during a pandemic, ranging from regional income, and people's purchasing power to the average community rice consumption. The weakening of economic activity at the regional level in Indonesia, began to recover in the year after the "New Normal" regulation, the economy of each region began to improve and people's purchasing power slowly strengthened.

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“…Furthermore, encouraging non-fossil fuel export has affected the Gross Domestic Product (GDP) expansion through fuel price and currency exchange rate stabilization (Douvan, 2019) through fuel subsidy elimination, which leads to rising raw material cost, auxiliary material cost, and cost of capital (Chandrarin et al, 2022;Heriqbaldi et al, 2022). This condition encourages the Bank of Indonesia to exercise stringent control on foreign currency exchange rates and interest rates to maintain the stability of imported fuel prices (Mukhlis et al, 2020). The growth of non-oil and gas exports, affected by the current unstable fuel price, exchange rate, and interest rate, resulted in GDP growth of minus 3.46 percent during the 2020 crisis.…”

Section: Introductionmentioning

confidence: 99%

The Role of Export in Boosting Indonesia’s GDP during Crisis: Macroeconomic Conditions

Goestjahjanti,

Pasaribu,

Novitasari

et al. 2023

Etikonomi

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Research examining the determinants of export activities affecting economic growth during the pandemic is gaining global interest, particularly in Indonesia, which recently reduced its fuel subsidy as a unique case in this field. Hence, this study examines the role of export and macroeconomic conditions, including fuel price, exchange rate, and interest rate, in boosting Indonesia’s GDP during the crisis. We examine this relationship by conducting a structural equation model and path analysis on secondary data from 1995-2022. The result shows that both partially and simultaneously, fuel prices, exchange rates, and interest rates significantly affect exports. On the other hand, an increase in export activity improves Indonesian GDP. Thus, simultaneous control of fuel prices, exchange rate, interest rate, and export value can improve Indonesian GDP growth even during the crisis. Based on this result, this article proposes suggestions to the government for a stable fuel price, exchange rate, interest rate, and government policy to promote future economic growth.JEL Classification: E31, E43, F31, C32, O47

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Interest Rate Volatility of the Federal Funds Rate: Response of the Bank Indonesia and its Impact on the Indonesian Economic Stability

Cited by 11 publications

References 15 publications

Federal Funds Rate Spillover Effect On Emerging Market Banking Liquidity And Capital – Evidence From Indonesia

Federal Funds Rate Spillover Effect On Emerging Market Banking Liquidity And Capital – Evidence From Indonesia

Recall the Impact of the Covid – 19 Virus in Indonesia: Regional Perspective

The Role of Export in Boosting Indonesia’s GDP during Crisis: Macroeconomic Conditions

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