Analysis of the Effectiveness of Monetary Policy Transmission through a Line of Credit and Inflation Expectations in Indonesia

This study aims to determine the effectiveness of the transmission mechanism of monetary policy by reviewing the amount of the deadline that required the transmission mechanism of monetary policy in achieving the goals of the final form of the output gap and inflation by using the channel of credit and inflation expectations. In addition, this study also aims to determine the relationship long-term and short against the target output gap and inflation. This study uses a regression model Vector Error Correction Model (VECM) to estimate the influence of the transmission mechanism of monetary policy to the output gap and inflation through the channel of credit and the regression model of Vector Autoregression (VAR) to estimate the influence of the transmission mechanism of monetary policy to the output gap and inflation through the channel of inflation expectations. The Data used in this research is the data series time quarter from 2008 to 2018. Data peneliltian used to estimate the influence of the transmission mechanism of monetary policy to the output gap and inflation through the channel of credit in the form of secondary data consisting of the benchmark interest rate of Bank Indonesia, the interest rates on the interbank money market 1 month, loan interest rates, money supply (M2) and the amount of working capital loans disbursed. While the data used to estimate the influence of the transmission mechanism of monetary policy to the output gap and inflation through the channel of inflation expectations in the form of secondary data consisting of the benchmark interest rate of Bank Indonesia, inflation expectations. The secondary Data used is sourced from the annual reports that are published from the official website of the Bank of Indonesia, the data of the Central Bureau of Statistics and the International Monetary Fund. The results of this study showed that the effectiveness of the transmission mechanism of monetary policy through the credit channels require the deadline each of the 8 (eight) of the quarter and 10 (ten) quarter in achieving the goals of the end of the output gap and inflation. While the effectiveness of the transmission mechanism of monetary policy through the channel of inflation expectations require the deadline each of the 4 (four) quarter and 6 (six) quarter in achieving the goals of the end of the output gap and inflation. The results also showed only policy transmission mechanism built rmelalui credit lines that have long-term relationships against inflation while the transmission mechanism of monetary policy through the channel of inflation expectations have short-term relationship strong.