Asymmetric transmission of monetary policy to interest rates: Empirical evidence from Indonesia

Fitri Ami Handayani, Febrio Kacaribu

Research output: Contribution to journalReview articlepeer-review

1 Citation (Scopus)

Abstract

This study investigates monetary policy transmission to the interest rates in Indonesia, focusing on changes in pricing behavior that may have occurred after the shift of benchmark policy rates in August 19, 2016. We analyzed monthly data on money market, deposit, and lending rates from November 2011 to December 2019. Two specifications of the error correction model capture asymmetric adjustments. We find that the new policy rate regime has improved the response of money market rates. However, the rigidity of bank retail rates has increased. Specifically, lending rates have become more rigid upwards, as lenders have become more responsive to monetary easing than to monetary tightening.

Original languageEnglish
Pages (from-to)119-150
Number of pages32
JournalBuletin Ekonomi Moneter dan Perbankan
Volume24
Issue number1
DOIs
Publication statusPublished - Mar 2021

Keywords

  • Asymmetric adjustment
  • Indonesia
  • Monetary policy

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