The Effect Of Credit To The Inflation Rate Through Gross Domestic Product In Indonesia

Abstract

Credit markets are not always balanced because of unbalanced information and other causes. There are two credit channels that influence the transmission of monetary policy from finance to the real sector, namely bank credit channels that are more concerned with the behavior of banks that are more selective in credit selection because of asymmetric information.This study aims to determine the effect of credit that consists of investment credit, working capital credit and consumption credit to the inflation rate through Gross Domestic Product (GDP) in Indonesia. The overall data used in this study is secondary data from the result of systematic recording in the form of time series from 2007 to 2016 obtained from the Central Bureau of Statistics, Bank Indonesia Report and Indonesian Banking Statistics. Data were analyzed by using multiple regression with Ordinary Least Square (OLS) approach. Based on the results of the research, simultaneous credit has a positive and significant effect on inflation through GDP and partially found that investment credit and working capital credit have positive and significant effect to inflation through GDP, while consumption credit has positive and insignificant effect.

Will Demographic Changes Affect Monetary Policy with Interest Rate Shocks in Indonesia?

“…Then, domestic credit has a significant negative relationship to monetary policy. These results are not in line with research by Anwar and Akbar (2018) and Ikpesu (2021).…”

“…The inflation response was calculated based on the cumulative and maximum values. The second model adopts the model from Chen (2017), Anwar & Akbar (2018), Kammoun et al (2020), and Ikpesu (2021) which can be written as equation ( 3), (4) for the cumulative value while the maximum value is like equation ( 5), and (6).…”

“…The use of the demographic aspect adopts Chen's (2017) research which discusses the effect of demographic changes on the effectiveness of monetary policy. While the non-demographic aspect (real aspect) adopted research from Anwar and Akbar (2018), Kammoun et al (2020), Ikpesu (2021). The technology dummy variable was also used in the model to determine the effect of the technology variables on the effectiveness of monetary policy, where 0 represents conditions before 2015 and 1 represents conditions after 2015.…”