Effectiveness of monetary policy transmission in Indonesia
This study discusses the channel of monetary policy transmission mechanismÂ of money, credit, interest rate and exchange rate in Indonesia. The effectivenessÂ of the transmission mechanism of monetary policy in Indonesia can be describedÂ and explained by the ultimate target object in Indonesia, specificallyÂ economic growth and inflation. The analytical tool used in this study is VectorÂ Error Correction Model (VECM) which uses impulse response and varianceÂ decomposition in determining the effectiveness of monetary policy transmissionÂ mechanism. The results explain that the credit channel is considered effectiveÂ in explaining economic growth and the interest rate channel is effective inÂ explaining inflation found in Indonesia.
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