Monetary Policy Transmission Mechanisms Across Regimes in Indonesia

Deskripsi

This study investigates the monetary policy transmission channels in two policy frameworks in Indonesia: The Monetary Base Targeting Framework (1991Q1-2005Q2) and the Inflation Targeting Framework (2005Q3-2019Q4). Based on a Structural Vector Autoregressive (SVAR) model with short-run restrictions, the study considers four channels (interest rate, credit, asset price, and exchange rate), and examines their relative importance on output and inflation in response to a monetary policy shock. The results show that the interest rate, credit, and exchange rate channels transmit the monetary policy better in the second framework, while the asset price channel is better in the first framework.