Index
Central Bank Policy: Theory and Practice
ISBN: 978-1-78973-752-3, eISBN: 978-1-78973-751-6
Publication date: 25 July 2019
This content is currently only available as a PDF
Citation
Warjiyo, P. and Juhro, S.M. (2019), "Index", Central Bank Policy: Theory and Practice, Emerald Publishing Limited, Leeds, pp. 553-569. https://doi.org/10.1108/978-1-78973-751-620191023
Publisher
:Emerald Publishing Limited
Copyright © 2019 Emerald Publishing Limited
INDEX
Note: Page numbers followed by “n” with numbers indicate footnotes.
Academic thinking
, 6–9
Accountability
, 40–41, 241, 265–266, 286, 292n3, 335, 341–342, 361
Accountable central bank
, 350
Ad hoc
models
, 288
role
, 408
Adaptive expectations formation
, 88
Administered prices (AP)
, 180, 237, 265, 312
Administrative instruments
, 413
Adverse selection bias
, 72
Aggregate demand (AD)
, 164, 287
curve
, 88
shock
, 63
Aggregate Rational Inflation–Targeting Model for Bank Indonesia model (ARIMBI model)
, 267, 288
Aggregate supply (AS)
, 146
Amalgamating MPTM analysis
, 133–134
American Deposit Receipts (ADR)
, 415
Amplification
, 129
Annual Development Plan
, 268
Annual Financial Statements of Bank Indonesia
, 346
Annual monetary base targets
, 268n9
Argentina, monetary policy regime in
, 182–183
Asian Financial Crisis (1997/1998)
, 27, 35, 106, 111, 116, 151–152, 155, 262, 268, 271, 315, 401, 424, 441–442, 503–504
Asset price channel
, 126–127, 351
in EMEs
, 145–146
in Indonesia
, 152
Asset prices
, 140, 480
booms
, 473
bubbles
, 424, 436, 440, 465
Asset(s)
bank
, 491
market prices
, 439
portfolios
, 28
securitization
, 142–143
Authority theory
, 328–331
Automated teller machines (ATM)
, 5, 38, 190
Back-of-the-envelope approach
, 175
Backward-looking Taylor rule
, 212
Bagehot’s Rule
, 23
Balance of payments (BOP)
, 22, 81, 85, 86n6, 117, 177, 216, 288, 388, 424
Balance sheet
conditions
, 490
constraint
, 494
Balance sheet channel
, 132, 154–155
collateral constraints
, 134–137
in EMEs
, 146–149
external finance premium
, 133–134
Balassa-Samuelson effect
, 127
Bank for International Settlements (BIS)
, 26n2, 32, 36, 430–431, 463
Bank Indonesia (BI)
, 3–4, 15–16, 110–111, 345
communication strategy
, 382–384
independence and accountability
, 344–346
officers
, 345
Bank Indonesia Act (BI Act)
, 111, 179n9, 186, 261–264, 266, 380, 382
amendments to
, 283–286
aspects for
, 271
Board of Governors
, 273
macroeconomic models
, 287–288
rate consistency
, 279
surveys
, 267
Bank Indonesia Certificates (SBI)
, 67, 69, 152, 189, 218, 285, 439, 510
Bank Indonesia Facilities (FASBI)
, 218
Bank Indonesia policy mix
, 502
foreign capital flow management
, 510–511
institutional arrangements
, 513–514
interest rate and exchange rate policies
, 507–510
macroprudential policy
, 511–513
policy mix targets and instruments
, 504–507
Bank lending
, 50
behavior
, 76, 130
channel
, 130–131, 151, 154–155
Bank Negara Indonesia (BNI)
, 21
Bank of Canada
, 490
Bank of England (BoE)
, 20–21, 207, 307, 447, 450
Bank of Japan (BOJ)
, 26, 215, 358, 487–488
Bank(ing)
assets
, 491
BANK-optimal rate
, 73
behavior
, 71–74
capital channel
, 130–132
credit growth
, 457
crisis
, 442
deregulation policy
, 189
industry
, 493–497
interest rate regulations
, 398
intermediation function
, 219
regulatory policy
, 76–77
role
, 70
sector
, 272
supply function
, 131
survey
, 267
Bankruptcy
, 444
Barro-Gordon model
, 301–304
standard linear quadratic model
, 315
Basel Committee on Banking Supervision (BCBS)
, 26n2
Baseline ITF macroeconomic model
, 230–231
Bayes rule
, 58
Behavioral Model of Effective Exchange Rate (BEER)
, 287n22
Bipolarization
, 103–105
BI–Scripless Securities Settlement System (BI-S4)
, 37
Board of Governors meeting (RDG)
, 287
Bonds
, 463
Boom-bust financial cycle
, 425
Brazil, Foreign CFM effectiveness in
, 414–415
Bretton Woods system
, 25–26
period (1959–1970)
, 403
Business
cycle
, 439
decisions without collateral constraints
, 136
failure
, 131
survey
, 267
Capital
, 486–487
account management
, 99
capital-based bank
, 154–155
controls
, 403, 411, 412–414
mobility
, 403
Capital adequacy ratio (CAR)
, 121, 132, 416
Capital flow management (CFM)
, 387
Capital flows
, 84
macroprudential regulations on
, 415–416
management
, 34
volatility
, 400–402, 413–414
Capital market
barriers
, 84n5
development
, 190
function
, 147–148
Capital requirements
, 436–437, 471, 484–485
constraint
, 494
Cash-in-advance constraint (CIA constraint)
, 71n7
CCB
, (see Countercyclical capital buffer (CCyB))
Central bank
, 10–11, 36, 216, 243, 266, 270–271, 357, 372, 387, 452
academic thinking, political economy and
, 6–9
aspects and goals of
, 21–22
assessment
, 362
behavior
, 354
credibility
, 40–41, 103n9, 293
and economy
, 4–6
evolution
, 20
exchange rate stability and foreign capital flows
, 34–39
GFC
, 19–20, 28–31
gold standard era and real bills doctrine
, 22–24
under government control
, 24–26
inflation targeting
, 26–28
institute monetary policy
, 461
institutional arrangements and coordination
, 43–44
institutional reform
, 39–44
leaders
, 186
legal monetary policy framework
, 180
LOLR
, 20–21
loss function
, 231
macroprudential policy
, 431–435
monetary and financial system stability
, 35–36
monetary operations
, 90–93
monetary policy, price stability, and exchange rates
, 32–33
observers
, 365
payment systemic stability
, 36–39
policy
, 3
policy reform
, 31–39
role in FSS
, 429–431
transparency and communication
, 41–43
Central Bank Act
, 187
Central bank independence and accountability
, 26–28, 40–41, 226, 291n2, 292, 331–337
Bank Indonesia’s independence and accountability
, 344–346
central bank accountability theory
, 331–337
critical issue
, 339–341
delegation of authority theory
, 328–331
and economic performance
, 337–339
empirical dimensions
, 320–327
empirical studies
, 337
ex post and ex ante accountability
, 341–342
policy independence and credibility during crisis period
, 342–344
theoretical models concerning
, 327
Central bank policy mix
, 467
Bank Indonesia policy mix
, 502–514
conceptual dimension
, 463
DSGE model
, 462
DSGE modeling with macrofinancial linkages
, 486–502
formulation
, 481–486, 499–502
integration of monetary policy and macroprudential policy
, 468
ITF
, 461
price stability and financial system stability targets
, 463–467
structural macroeconomic modeling
, 473–486, 487
Taylor rule
, 469
transmission mechanism
, 470–473
Central banking laws
, 235–236
in EMEs
, 236
provisions in
, 235
Chicago Board of Exchange (CBOE)
, 393n1
China Banking Regulatory Commission
, 456
Classical economics
, 349–350
Classical quantity theory of money
, 59
Classical theory
, 11, 50–51
Collateral constraints
, 134–137, 488
Colombia, Foreign CFM effectiveness in
, 414–415
Committee on Payments and Settlement Systems (CPSS)
, 26n2
Communication
, 41–43, 358–361
effectiveness
, 382
methods
, 361–362
monetary policy
, 351
policy
, 280
targets
, 362–365
Consensus Forecast (CF)
, 153
Conservative agent
, 328–331
Conservative central bank
, 296n4, 328n4, 365–370
Constant elasticity of substitution (CES)
, 493
Constant rule
, 199
Consumer
inflation expectations
, 153
protection
, 456
Consumer Expectation Survey
, 267
Consumer price index (CPI)
, 65, 179, 237–238, 464
inflation projections
, 265
Contagion process
, 427
Core inflation
, 237–238, 243, 254, 265, 276, 311–312
Corporate
balance sheet channel
, 147
investment
, 125
technology
, 57
transparency
, 154
Cost
of capital on investment
, 124–125
of controlling inflation
, 175–176
of crisis recovery
, 28
of disinflationary policy
, 178n8
Countercyclical capital buffer (CCyB)
, 435, 454, 467
Covered interest parity (CIP)
, 123
Covered interest rate parity (CIRP)
, 84–85
Credibility
, 24, 39–41, 292, 319
during crisis period
, 342–344
effort to improving
, 295–298
index
, 307–308
macroprudential policy
, 474
measures
, 306
parameterization approach
, 307–308
problem
, 293–295
problem analysis with supply shocks
, 304–306
qualitative approach
, 308–309
quantitative modeling approach
, 309–311
Credit
, 491
availability and bank behavior
, 71–74
booms and busts
, 442–443
cards
, 38, 79, 113
ceilings
, 208
crunch
, 272
exchange rate
, 351
gap
, 480, 481–482
growth
, 417, 511
guarantees
, 131
information system development
, 77
market
, 75, 130
performance
, 70
risk
, 72, 132, 505
risk-taking behavior
, 468
supply function
, 132
Credit channel
, 268–269, 272
bank
, 470
in EMEs
, 146–149
In Poland
, 246
Credit default orders (CDOs)
, 452
Credit default swaps (CDS)
, 138, 393n2, 451
Credit rationing
, 130, 136, 439
equilibrium
, 71–74
Credit view of monetary transmission
, (see also Money view of monetary transmission)
aggregate demand response
, 129–130
balance sheet channel
, 132–137
bank capital channel
, 130–132
bank lending channel
, 130–131
risk-taking channel
, 137–140
Credit-to-GDP ratio
, 483
Crisis
, (see also Global financial crisis (GFC))
analyses
, 107
Asian Financial Crisis (1997/1998)
, 27, 35, 106, 111, 116, 151–152, 155, 262, 268, 271, 315, 401, 424, 441–442, 503–504
banking
, 442
economic
, 183–184, 442
exchange rates
, 105–107
external debt
, 442, 462
financial
, 22, 132, 344, 379, 423–424
México crisis (1994)
, 106
payments
, 462
post-global
, 464
prevention
, 20
sudden-stop capital reversal
, 462
US
, 462
Croatia, prudential regulations on foreign loans in
, 416–417
Croatian National Bank (CNB)
, 416
Cross-border capital mobility
, 90
Cross-border investment
, 388–389
Crowding out effect
, 122n6
Currency
, 5, 36
board
, 182n10
demand
, 88
fluctuations
, 123
Current account liberalization (CAL)
, 390
Cyclical behaviors
, 504–505
De facto approach
, 103–104, 402–403
De facto monetary policy strategy
, 278
De jure approach
, 103–104, 402–403
Debt-to-capital ratio
, 412
Debt-to-income ratio (DTI)
, 454, 467
Demand
for credit
, 72
curve
, 231
for deposits and loans
, 493
for foreign exchange
, 111
for investment
, 125
for money
, 55, 70, 287
Demand-side shocks
, 164–165
standard Poole model with
, 194–195
Democratic accountability
, 296n4, 331–337, 355–358
Deposit(s)
, 491
bank
, 21
insurance corporation
, 427–428
Deutsche Bundesbank
, 179, 184n12, 184–185, 214, 322, 447
Deutsche eMark (DEM)
, 95
Direct
credit
, 208
instruments
, 208
monetary instruments
, 246
pass-through effects
, 269
Disinflation process
, 314
Domestic bond market
, 91
Domestic currency
, 167
depreciation
, 183–184
stability
, 4
values
, 8
Domestic economy
, 401, 407–408, 467
Domestic financial
institutions
, 413
markets
, 401
repression
, 25
sector deepening
, 398–399
Domestic systemically important bank (D-SIB)
, 453
Domestic-oriented economy
, 470
Dornbusch’s overshooting model
, 82, 88–90, 101
Dual mandate
, 10, 14, 358, 461, 463, 467, 469, 477, 479, 507
Dynamic analysis of elasticity
, 98
Dynamic General Equilibrium Model of Bank Indonesia (GEMBI)
, 288
Dynamic Stochastic General Equilibrium model (DGSE model)
, 15, 141–143, 462
formulation
, 499–502
with macrofinancial linkages
, 486
macrofinancial modeling approaches
, 488–490
monetary policy and macroprudential policy
, 490–499
Eclectic inflation targeting (EIT)
, 224, 248, 250
Economic cycle
, 436
output-prices trade-off in
, 173–174
Economic factors
, 342–343, 366
public uncertainty to changes in
, 368–369
Economic performance
, 337–339, 374–377, 395
empirical phenomenon
, 395–396
Lucas Paradox
, 396–400
Economic/economy
, 57–58
Central bank and
, 4–6
crisis
, 183–184, 442
decision-making process
, 298
deregulation, period of
, 188–190
developments
, 335
downswing
, 132
exchange rates and
, 81–112
forecasts
, 349
fundamentals
, 397–398
growth
, 12, 162, 250, 356, 374, 387–388, 402, 461, 468
imperfect transparency
, 365
independence
, 320, 323–324
indicators
, 243n5, 363
integration
, 102
models
, 243–244
puzzle
, 68
recovery momentum
, 262
resources
, 349–350
shocks
, 88, 294–295
stability
, 7
stabilization and rehabilitation
, 187–188
system
, 67, 232
theory
, 440
transparency
, 352, 368–369
upswing
, (see Financial accelerator)
Emergency Funding Facility (FPD)
, 285
SUN purchases for
, 285–286
Emerging market economies (EMEs)
, 6, 26, 207, 244, 351, 387, 441, 461, 493–494
asset price channel
, 145–146
credit and balance sheet channels
, 146–149
exchange rate channel
, 145–146
expectations channel
, 145–146
interest rate channel
, 145–146
monetary policy transmission in
, 145
monetary policy transmission in post-GFC era
, 149–151
Emerging Portfolio Fund Research (EPFR)
, 401
Empirical studies
on effect of capital flow volatility
, 400–402
of transparency and communication strategies in countries
, 370–380
Equilibrium
, 59
analysis
, 53
credit rationing
, 74
model
, 57
Error correction model (ECM)
, 156
European Central Bank (ECB)
, 26, 142, 291, 321, 350, 426, 447, 453n3, 476
European Monetary System (EMS)
, 178
European Union (EU)
, 141
monetary policy transmission
, 141–143
Eurosystem
, 416
Ex ante
, 398, 435
accountability
, 341–342
credibility index
, 307
monetary policy clarity
, 249
Ex post
, 398
accountability
, 341–342
credibility index
, 307
monetary policy clarity
, 249
Exchange rate channel
, 127–128, 418
in EMEs
, 145–146
in Indonesia
, 152
Exchange rate determination theory
, (see also Monetary economic theory), 82
CIRP
, 84–85
exchange rate model with sticky prices
, 88–90
market microstructure models
, 93–97
Mundell–Fleming model
, 85–87
portfolio balance model and central bank monetary operations
, 90–93
PPP
, 83–84
Exchange rate mechanism (ERM)
, 106–107, 183
Exchange rate pass-through (ERPT)
, 99–101
Exchange rate(s)
, 32–33, 81, 287, 391, 429, 462, 464, 468, 480, 507, 511
appreciation
, 394
choice of exchange rate system
, 101–103
crises
, 105–107
depreciation
, 92–93, 421
determination theory
, 82–97
developments
, 269
empirical findings for
, 98
empirical findings in Indonesia
, 100–101
and inflation
, 99–100
intervention
, 99
models
, 82, 88–90
monetary policy and theory
, 81–82
overshooting model
, 89
policy
, 507–510
stability
, 34–39, 122–123, 235, 250, 402
stabilization
, 404–405
stabilization policy
, 107–109
system and policy
, 101, 109–112
systems
, 103–105, 403
targeting
, 167–168, 182–184
theory
, 82, 93
and trade
, 98–99
volatility
, 364, 402
Expectations channel
, 128–129
in EMEs
, 145–146
in Indonesia
, 152
market
, 468
Expected Augmented Phillips Curve (EAPC)
, 399
Export Bonus System
, 110n11
Fear index
, 393n1
Fear of floating
, 32, 103–105, 107
Federal Funds Rate (FFR)
, 3, 143, 356, 418, 420, 464–465
Federal Open Market Committee (FOMC)
, 3, 41, 308, 321
Federal Reserve Act
, 179–180
Federal Reserve System (Fed)
, 21, 33
Financial
account
, 389
amplification
, 139
crisis
, 22, 132, 344, 379, 423–424
DSGE models with financial frictions
, 491–497
globalization
, 405
indicators
, 243n5
innovation
, 27–28, 143–144
instability
, 425
interconnectedness
, 444–445
liberalization
, 82
policy transparency
, 373
repression
, 188
system
, 124, 141, 447
system instability
, 430–431
theory
, 138
transparency
, 351
variables
, 353
Financial accelerator
, 15, 119, 133–134, 137, 488
theory
, 439–440
Financial asset(s)
, 127, 391, 437
portfolio diversification
, 91
prices
, 126, 440, 463
Financial Conduct Authority (FCA)
, 43
Financial market(s)
, 146, 364, 392–393
development
, 147
liberalization
, 147
volatility
, 355
Financial network
analysis
, 449, 451
chain
, 452
Financial Policy Committee (FPC)
, 513
Financial procyclicality
, 426, 435
empirical evidence for
, 440–444
financial accelerator theory
, 439–440
financial cycle and economic cycle procyclicality
, 436
interaction between business cycle
, 438
Financial products
, 189
innovation diversification
, 452
Financial sector
, 474
liberalization
, 190
procyclicality
, 269n10
Financial Services Authority (OJK)
, 44, 261n2, 505, 514
Financial Soundness Indicator (FSI)
, 465
Financial Stability Report (FSR)
, 378–379, 379n7
Financial System Crisis Prevention and Resolution Act (PPKSK Act)
, 426, 453, 505, 514
Financial system stability (FSS)
, 19–20, 24, 28–29, 35–36, 280, 364, 411–412, 423, 472, 476–477, 502
central bank’s role in
, 429–431
conceptual dimension
, 424
GFC of 2008/2009 and
, 425–429
interconnectedness and financial networks
, 444–452
macroprudential policy theory and practices
, 452–458
effect of monetary policy
, 472
risk
, 471
targets
, 463–467
theoretical model and empirical evidence of financial procyclicality
, 435–444
Financial technology (FinTech)
, 5, 38–39
Fixed exchange rate
regime
, 87, 102
system
, 102, 110, 405
Flexible Inflation Targeting Framework (FITF)
, 10, 278n13, 279, 463
Foreign bond market
, 91
Foreign capital flows
, 34–39, 387
and economic performance
, 395–400
foreign CFM
, 409–417
impact of global spillovers from US monetary policy
, 418–421
management
, 34, 461–463, 470, 487, 503, 510–511
and monetary policy dynamics in Indonesia
, 406–409
and monetary stability
, 400–409
neoclassical theory and PI theory
, 388–391
push and pull factors
, 391–395
theoretical dimension and
, 388
volatility
, 423
Foreign CFM
, 409
practices
, 414–417
principles, targets, and instruments
, 410–414
Foreign exchange
, 81
derivatives
, 416
intervention
, 107–109, 122–123, 507
Foreign exchange market
, 88, 118, 129, 427, 467
intervention
, 404
microstructure
, 93
GARCH
, 123n7
“Gebrakan Sumarlin”
, 189n13
General equilibrium analysis framework, money role in
, 52
MIU function model
, 55–57
OLG model
, 53–55
real sector analysis
, 52–53
Germany in controlling inflation
, 184
Global economy
, 387
developments
, 391–392
Global financial crisis (GFC)
, (see also Inflation), 3, 6–7, 12, 14, 19–20, 32–33, 35, 38, 81, 137, 150, 154, 258, 262, 418, 423, 461, 465
of 2008/2009 and FSS
, 425–429
central banks and
, 28–31
inflation targeting after GFC of 2008/2009
, 257–259
strengthening ITF implementation strategy after
, 277–281
Global spillovers
, 387
from US monetary policy
, 418
Global Systemically Important Banks (G-SIBs)
, 455
Government
, 295
bond yields
, 243
debt securities
, 271, 285, 439
financial sustainability
, 272
fiscal stimulus package
, 512
and parliament
, 363–364
Great Depression (1930)
, 7, 24, 28, 31, 137
Great Moderation
, 27, 462
Gross domestic product (GDP)
, 12, 85
deflator
, 237n4
growth
, 420–421
Hamiltonian function
, 56
Headline inflation
, (see Consumer price index (CPI))
Hedge funds
, 447
Herding behavior
, 427
Heterogeneous economic players
, 488
Heterogeneous information
, 93–97
Household
balance sheet channel
, 147
and entrepreneurs/businesses
, 491–493
Hybrid Phillips curve model
, 173
Imperfect information
, 57
money–output correlation against
, 59–61
relationship between money–output and
, 57–59
Imperfect international finance
, 399–400
Imperfect transparency
, 365–370
Implicit interest rate policy rule
, 212–215
Implicit targeting
, 186
Independence
, (see also Central bank independence and accountability), 40–41, 43–44
goal
, 320–322, 344–345
index
, 325
institutional
, 168
instrument
, 236, 320, 322–323, 345
performance
, 338
personal
, 323–324, 345
policy
, 319, 342–344
political
, 320
Indonesia
assessing monetary policy credibility in
, 311
asset price channel
, 152
balance sheet channel
, 154–155
Bank Indonesia’s communication strategy
, 382–384
bank lending channel
, 154–155
banking system
, 272
economic stabilization and rehabilitation
, 187–188
empirical studies of time inconsistency in Indonesia
, 314–318
era of oil-based economic growth
, 188
exchange rate channel
, 152
exchange rate on economy in
, 100–101
exchange rate system and policy in
, 109–112
expectations channel
, 152
foreign capital flows and monetary policy dynamics in
, 406–409
inclusion in IMF Program
, 273
interest rate channel
, 152
ITF
, 186–187, 262–263
monetary operations in
, 216–220
monetary policy in
, 66–69, 186
monetary policy transmission in
, 151
period of economic deregulation, debureaucratization, and liberalization
, 188–190
policy credibility in Indonesia during ITF implementation
, 311–314
political transition process in
, 272
transmission of risk-taking behavior and central bank policy mix
, 155–157
transparency and communication strategy in
, 380
transparency to strengthen monetary policy framework
, 380–382
Inflation
, (see also Global financial crisis (GFC)), 162, 349, 376, 387–388, 420–421, 463–464
bias
, 167n3, 302–303
controlling cost
, 175–176
deviation
, 409
exchange rate and
, 99–100
exchange rate transmission
, 128
expectations
, 128–129, 153n10, 267
indicators
, 243
inflation-averse central bank
, 328
inflation-forecast-based rule
, 201
nutters
, 278n13
projections
, 242–244, 267–268
rule
, 303
stability
, 236
variance
, 367–368
Inflation targeting
, 169, 185
clarity of commitment to
, 248–249
classification
, 250–251
credibility
, 249–250
and economic performance
, 252
after GFC of 2008/2009
, 257–259
importance
, 250–252
regimes
, 247
regimes and rationale
, 247–248
successes and alternative opinions
, 252–257
Inflation Targeting Framework (ITF)
, 7, 19, 26–27, 33, 100, 179, 186–187, 201, 223, 261, 278n13, 311, 351, 403, 429, 461
actual and target inflation
, 276
announcing
, 239–240
formulation
, 236–240, 264–265
by government
, 283–285
implementation
, 262–263, 274–277
in inflation forecast targeting format
, 232–234
institutional framework
, 235–241, 263–266
issues during transition period
, 271–274
ITF-based monetary policy framework
, 223–224, 226
macroeconomic theory
, 230
operational framework
, 242–247, 266–271
point or range
, 238
policy credibility in Indonesia during ITF implementation
, 311–314
rationale, characteristics, advantages, and disadvantages
, 224–229
size
, 238
strengthening ITF implementation strategy after GFC
, 277–281
theoretical model
, 229–234
Institutional arrangements
, 513–514
and coordination
, 43–44
Instrument independence
, 320, 322–323, 345
in monetary policy
, 236
Interbank
money market
, 449
system dynamics
, 449
Interconnectedness
, 453
empirical evidence for financial
, 447–452
and financial networks
, 444
theory
, 444–447
Interest rate
, 67, 75–76, 194–196, 205–207, 247, 258–259, 351, 357, 364, 468, 502
lag
, 409
policy
, 120–121, 507–510
rules
, 203
Interest rate channel
, 124–126
in EMEs
, 145–146
in Indonesia
, 152
Interest rate parity theory (IRP theory)
, 84–85
International Capital Asset Pricing Model (IAPM)
, 390
International Monetary Fund (IMF)
, 26n2, 270, 388
assessing transparency by
, 370–372
Investment
capital
, (see Loan—capital)
cost of capital on
, 124–125
demand function
, 125
wealth effect on
, 127
J-curve effect
, 100–101
“Just-do-it” strategy
, 186, 308
k-percent rule
, 198
Kalman filter
, 312n7, 400
Keynesian and neoclassical economics
, 349–350, 461
Keynesian-neoclassical synthesis
, 29, 61–63
Kydland and Prescott’s model
, 298–301
Large-scale models
, 244
structural macroeconomic model
, 267
Leading Economic Indicators (LEI)
, 268
Lender of last resort (LOLR)
, 5, 7, 19–21, 28–29, 35, 38, 215, 427–428
Lending
rate
, 495
requirements
, 246
Lending facility (LF)
, 120
Linearization model
, 497
Liquidity
, 139–140, 486–487
liquidity-related macroprudential instruments
, 456
market
, 39, 139
Liquidity preference money supply (LM)
, 194
Loan
agreements
, 488–489
capital
, 436
demand and supply of
, 154
loanable fund theory
, 72–73
Loan-to-deposit ratio (LDR)
, 70, 121, 132, 454, 467
Loan-to-value ratio (LTV ratio)
, 4, 134, 137, 440, 467, 513
Log-linear
equation
, 88
first-order condition
, 497
Loss function
, 232
of monetary authority
, 199
Lucas Island model
, 57–58
Lucas Paradox
, 395–400
Lucas supply function
, 59
Macroeconomic
policies
, 409–410
stability
, 410–412, 463–465, 502
welfare function
, 162
Macroeconomic Model of Bank Indonesia (MODBI)
, 267, 287
Macrofinancial linkage
, 428
Macrofinancial modeling approaches in DSGE
, 488–490
Macrointernational linkage
, 428
Macronational linkage
, 428
Macroprudential policy
, 35–36, 258, 410–411, 424, 431, 461–462, 466–467, 469–470, 487, 511–513
application in various jurisdictions
, 456–458
central bank
, 431–435
in DSGE modeling
, 490–497
framework
, 468
interconnectedness and financial networks
, 444–452
loan constraints
, 499
principles, targets, and instruments
, 453–456
response
, 433
theoretical model and empirical evidence of financial procyclicality
, 435–444
theory and practices
, 452–458
time deposit rate
, 498
Macroprudential regulation
, 5
on capital flows
, 415–416
Market
cycle
, 145
equilibrium loanable funds
, 73
imperfections
, 69–77
liquidity
, 39, 139
microstructure analysis
, (see Exchange rate theory)
microstructure models
, 93–97
signaling
, 271
transparency
, (see Operational transparency)
Market expectations
channels
, 468
Poole model variations with
, 195–197
Markov-switching model
, 401
Markowitz model/theory
, 126, 390
Marshall–Lerner condition
, 98–100
Mass media and public
, 362–363
McCallum rule
, 200–201, 212, 214
México crisis (1994)
, 106
Micro, small, and medium enterprises (MSME)
, 38, 77
Microfinancial sector
, 428
Microprudential policy
, (see also Macroprudential policy), 377–378n6, 431
Microprudential regulation
, 5
Microprudential supervisory authority
, 424
Monetarist analysis framework, money role in
, 61–63
Monetary aggregates
, 205–207, 215
Monetary and Financial Policies (MFP)
, 370–371
Monetary Authority of Singapore (MAS)
, 457
Monetary condition index (MCI)
, 246
Monetary economic theory
, (see also Exchange rate determination theory), 11, 69, 115, 124
credit availability and bank behavior
, 71–74
money
, 70–71
new paradigm in
, 74–77
Monetary policy
, 5, 23, 26, 28–30, 32–33, 35, 49, 105, 117, 125, 126, 131, 161, 187, 189, 225, 274, 337, 377n6, 387, 462, 464–465, 469, 472, 487
accountability
, 226
autonomy
, 82n1
communication strategy
, 358
communication targets
, 362–365
communications methods
, 361–362
consensus regarding role of
, 65–66
consistency
, 27
in DSGE modeling
, 490–499
dynamics in Indonesia
, 406–409
in economy
, 49–50
effectiveness
, 272, 285
empirical evidence in Indonesia
, 66–69
foreign capital flows and monetary stability
, 400–409
framework
, 468
impact of global spillovers from US monetary policy
, 418–421
inconsistency
, 40
instruments
, 205–212
market imperfections and new paradigm of monetary economics
, 69–77
monetary policy modeling and variable selection issues
, 63–65
normalization process of
, 30
optimization
, 387
rate
, 393, 495
regime
, 355–358
scope of communication
, 358–361
theoretical review
, 50–63
and theory
, 81–82, 119
transmission
, 268–270
transmission channels
, 353
transparency
, 42–43, 139, 225, 349–350–351, 373–377
Monetary policy credibility
, 102–103, 225, 275, 429, 482–483
assessment in Indonesia
, 311–318
conceptual dimensions of policy credibility
, 293–298
empirical studies
, 306–311
time inconsistency
, 298–306
Monetary policy operational framework
, 12–13, 193
application in several countries
, 205–215
conceptual dimensions and theoretical models
, 194–204
monetary operations in Indonesia
, 216–220
selection strategy
, 203
Monetary policy response
implicit interest rate policy rule in several countries
, 212–215
monetary aggregates
, 215
Monetary policy strategy framework
, 161
from 1990s to present day
, 179–182
empirical studies and related issues
, 170
exchange rate targeting
, 167–168, 182–184
final policy target
, 162, 177
formulation
, 170–171
implementation in several jurisdictions
, 176
inflation targeting
, 169, 185
monetary policy regime in Indonesia
, 186–190
monetary targeting
, 168–169, 184–185
no explicit anchor targeting
, 169–170, 186
nominal income targeting
, 170
output-prices trade-off in economic cycle
, 173–174
Phillips curve phenomenon
, 171–173
quadratic function
, 162–163
regime
, 166–167, 182
sacrifice ratio
, 175–176
shift in priorities
, 177–179
short-term output-prices trade-off
, 171–173
targeting long-term policy goals
, 163
targeting short-term policy goals
, 163–166
Monetary policy transmission mechanism (MPTM)
, 11–12, 115–116, 118–120, 271
in advanced countries
, 141
in countries
, 140
in EMEs
, 145–151
empirical MPTM studies
, 140–141
in EU
, 141–143
in Indonesia
, 151–157
map
, 116–117
monetary transmission channels
, 124–129
policy rate and monetary operations
, 120–123
in United States
, 143–145
Monetary policy trilemma
, 90
index in Indonesia
, 407
of open economy
, 110, 402–405
Monetary shocks
, 63
Monetary stability
, 35–36, 400
empirical studies on effect of capital flow volatility
, 400–402
foreign capital flows and monetary policy dynamics in Indonesia
, 406–409
monetary policy trilemma in open economy
, 402–405
Monetary transmission channels
, 124
credit view
, 129–140
money view
, 124–129
Monetary transparency
, 351
Money
, 11, 36, 49, 70–71
center
, 449
consensus regarding role of
, 65–66
in economy
, 49–50, 63
money–output correlation against imperfect market competition and price rigidity
, 59–61
neutrality
, 50–51, 55, 59
relationship between money–output and imperfect information
, 57–59
role in general equilibrium analysis framework
, 52–57
role in monetarist analysis framework
, 61–63
substitution
, 85
supply
, 51–52, 75, 194–196, 351, 468
theoretical review
, 50
Money market
equilibrium
, 88
instrument
, 190
Money market account (MMA)
, 70
Money view of monetary transmission
, (see also Credit view of monetary transmission), 124
asset price channel
, 126–127
exchange rate channel
, 127–128
expectations channel
, 128–129
interest rate channel
, 124–126
Mundell–Fleming model
, 11, 82, 85–87, 101, 402
National Development Program
, 268
National Inflation Task Force
, 279, 317
Negotiable certificates of deposit (NCD)
, 190
Neoclassical
economics
, 59
investment theory
, 124–125
model
, 55
theory
, 388–391
Net Foreign Assets (NFA)
, 406–407
Net interest margin (NIM)
, 132
Net International Reserves (NIR)
, 218
Net open position (NOP)
, 412, 454
Neutrality of money
, 50–51
hypothesis
, 163
Normalization
of monetary policy
, 30
monetary policy
, 508–509
O/N interbank rate
, 220
Oil-based economic growth, era of
, 188
Open economy
, 110, 119, 161
monetary policy trilemma in
, 402–405
Open global economic dynamics
, 208
Open market operations (OMO)
, 92, 112, 208, 216, 246
SUN purchases on primary market for
, 285
Optimal monetary policy
, 199–200
aspects of optimal monetary policy formulation
, 201–204
strategy
, 196
Optimal policy
mix
, 461
rule
, 232–234, 329
Organization for Economic Co-operation and Development (OECD)
, 443
Output
gap
, 287
output-prices trade-off in economic cycle
, 173–174
stability
, 162–166
stabilization
, 366–368
volatility
, 376–377
Parameterization approach
, 307–308
Payment instruments
, 5, 21
development
, 6
Payment system
, 5, 426, 467, 470
policy
, 4–5, 461
stability
, 36–39
People’s Bank of China (PBoC)
, 456
Philips curve
, 88, 171, 201
behavior
, 302
equation
, 480
formation of expectations in
, 172–173
linearity in
, 172
presence of
, 171–172
Pigou effect analysis
, 51
Policy
accountability
, 319
authorities
, 294
formulation process
, 355, 372
framework
, 469
implementation
, 246–247, 311n6
independence
, 319, 342–344
innovations
, 8
mix targets and instruments
, 504–507
Policy credibility
, 293, 319, 344
effort to improving credibility
, 295–298
in Indonesia during ITF implementation
, 311–314
problem
, 293–295, 298–306
Policy instruments
, 194
standard Poole model with demand-side shocks
, 194–195
Policy rate
, 120, 499
á la Taylor rule
, 403
Policy response
, 197
feedback rule and optimal monetary policy
, 199–200
simple feedback rule
, 200–201
Policy rule
, 203, 212–215, 295, 340
Policy transparency
, 14, 352
conceptual dimensions
, 350
economic transparency
, 368–369
empirical studies of transparency and communication strategies
, 370–380
implications of imperfect transparency
, 370
monetary policy communication strategy
, 358–365
public uncertainty concerning preferred weight
, 366–368
theoretical models on
, 365
transparency, monetary policy regime, and democratic accountability
, 355–358
transparency and communication strategy in Indonesia
, 380–384
viewpoints concerning transparency
, 351–355
Policy-making
characteristics
, 308
credibility
, 295
process
, 325
Political
economy
, 6–9
imperfect transparency
, 365
independence
, 320
support for rule of law
, 297
transition process in Indonesia
, 272
transparency
, 325, 332, 352
uncertainty
, 295
Portfolio investment (PI)
, 388
theory
, 388–391
Price
equilibrium
, 89
formation
, 351
price-setting equation
, 61
stability
, 7, 12, 19–20, 29, 32–33, 49, 76, 162–166, 235, 402, 462–467, 476–477
stabilization strategy
, 195
Price index
, 237
selection
, 236–237
Price rigidity, money–output correlation against
, 59–61
Price-based approach
, 217
quantity-based approach to
, 217–220
Private capital flows
, 443–444
Property
crisis
, 442
prices
, 464–465
survey
, 267
Prudential Regulation Authority (PRA)
, 43, 513
Prudential regulations
, 412–414
on foreign loans
, 416–417
Public uncertainty
to changes in economic factors
, 368–369
concerning preferred weight
, 366–368
Push and pull factors
, 391–395
“Push-me, pull-you” factor
, 474–475
Quantitative easing (QE)
, 28
Quantitative modeling approach
, 309–311
Quantity-based approach
, 216–217
to price-based approach
, 217–220
Quarterly monetary base targets
, 268n9
Ramsey model
, 55, 57
Real exchange rate
, 409
gap
, 480n3, 482
Reserve Bank of India (RBI)
, 209, 447
Reserve Bank of New Zealand (RBNZ)
, 323, 360
Retail
bank
, 494
deposit bank branch
, 496
loan bank branch
, 495
payment system
, 38
sales survey
, 267
Risk
premium
, 392
risk-averse behavior of banks
, 71
Risk-management
behavior
, 490
techniques
, 138
Risk-taking behavior
, 400, 474–475, 477, 486–487
Risk-taking channel
, 130, 137
liquidity
, 139–140
risk-taking dynamics
, 138–139
Risk-weighted assets
, 28
Rogoff model
, 13
Rules vs. discretion
, 197–201, 432–433
Rupiah devaluation policy
, 110
Say’s law
, 49–50
Seigniorage
, 57n1
Short-term
cyclical factors
, 471
exchange rate volatility
, 88
foreign loans
, 415–416
goals
, 359
interest rates
, 353
macromodel equation
, 62
output-prices trade-off
, 171–173
Phillips curve
, 287
Short-Term Forecast Model for the Indonesian Economy (SOFIE)
, 267, 287–288
South Korea, macroprudential regulations on capital flows in
, 415–416
Standard & Poor index (S&P index)
, 393n1
Stocks
, 463
of credit
, 50
market
, 118
prices
, 153
yields
, 394
Structural macroeconomic model
, 462, 473, 479
central bank policy mix formulation
, 481–486
coordination and losses
, 487
flexible to integrated inflation targeting
, 474–479
model structure and analysis framework
, 479–481
Superneutrality
, 51–52
of money
, 55–57
Supply-side shocks
, 164, 166
Poole model variations with
, 195–197
Swiss National Bank (SNB)
, 185
“SysMo”
, 466
Systemic risk
, 455
accumulation
, 504–505
Systemically important banks (SIB)
, 453, 500
T-Bills
, 69n6, 208
Taylor rule
, 13, 40, 200–202, 212, 214–215, 228, 234, 247, 287, 469, 473–474, 499
equation
, 312n7
policy response
, 479
Taylor’s aggregate demand equation
, 61
The Federal Reserve (the Fed)
, 321
Time inconsistency
, 294, 298, 306–311
Barro-Gordon model
, 301–304
credibility problem analysis with supply shocks
, 304–306
in Indonesia
, 314–318
Kydland and Prescott’s model
, 298–301
theory
, 13, 225
Tinbergen rule
, 506
for closed economy
, 87
Transparency and communication strategy
, 349, 370
assessing transparency by IMF
, 370–372
central banks
, 372
in crisis period
, 377–380
in Indonesia
, 380–384
monetary and financial policy transparency
, 373
monetary policy transparency and economic performance
, 374–377
Transparency assessment by IMF
, 370–372
Unemployment
, 178
United States (US)
crisis
, 462
expansionary monetary policy
, 419
monetary policy in
, 178, 418–421
monetary policy transmission in
, 143–145
subprime mortgage debacle
, 451
US Federal Reserve
, 349, 358, 360
US Monetary Policy Reaction Function
, 213
Vector autoregression approach (VAR approach)
, 64–65, 174, 176
Vector autoregressive model (VAR model)
, 141–143, 152, 154, 244
Volatility Index (VIX)
, 393
Wage behavior
, 61
Wage-price mechanism
, 60
Wage-setting model
, 60
Walras’ law
, 49n1, 54
World Bank (1997)
, 392
Zero interest-rate policy (ZIRP)
, 215
- Prelims
- Part I General Review
- Chapter 1 Introduction
- Chapter 2 Central Bank Evolution and Reform
- Part II Monetary Policy and Economy
- Chapter 3 The Role of Money and Monetary Policy in the Economy
- Chapter 4 Exchange Rates and the Economy
- Chapter 5 Monetary Policy Transmission Mechanism
- Part III Monetary Policy Framework
- Chapter 6 Monetary Policy Strategic Framework
- Chapter 7 Monetary Policy Operational Framework
- Chapter 8 Inflation Targeting Framework: Concept and Implementation at Central Banks
- Chapter 9 Inflation Targeting Framework: Implementation in Indonesia
- Part IV Institutional Aspect of Central Bank Policy
- Chapter 10 Monetary Policy Credibility and Time Consistency
- Chapter 11 Central Bank Independence and Accountability
- Chapter 12 Policy Transparency and Communication Strategy
- Part V New Paradigm of Central Bank Policy
- Chapter 13 Monetary Policy and Foreign Capital Flows
- Chapter 14 Macroprudential Policy and Financial System Stability
- Chapter 15 Central Bank Policy Mix
- Bibliography
- Index