Monetary Policy and Inflation in Indonesia: The Role of Dual Banking System
DOI:
https://doi.org/10.18502/kss.v3i13.4196Abstract
This study aims to examine the effect of monetary policy to the inflation rate in Indonesia from January 2011 to December 2015 via conventional and sharia systems. Vector Error Correction Model (VECM) is adopted for that purpose. The result shows that in the long run, conventional monetary policy transmission has an effect on inflation rate in Indonesia. Interbank money market variable has negative and significant influence on the inflation rate. While the loan to deposit ratio variable does not. On the Islamic side, the results show that in the long run, Islamic monetary policy transmission has a negative effect on inflation in Indonesia and Islamic money market has significant positive effect.
Keywords: Efficiency, Zakat Institution, Data Envelopment Analysis: Islamic economics, transmission of sharia and conventional monetary policy, inflation, VECM, vector error correction model.
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