The Effect of Monetary Instrument of Islamic Banking Financing Channel Towards The Economic Growth in Indonesia

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Published: Apr 30, 2022
DOI: https://doi.org/10.18196/jesp.v23i1.13198
Keywords:
Islamic Monetary Instruments, Islamic Banking Financing Channel, Economic Growth, Vector Error Correction Model (VECM)

Main Article Content

Sobar M. Johari
Department of Islamic Economics, Faculty of Islamic Studies, Universitas Muhammadiyah Yogyakarta, Special Region of Yogyakarta, Indonesia Department of Business Administration, College of Management, Asia University, Taiwan, Province of China
https://orcid.org/0000-0003-4987-1846
Wing Keung Wong
Department of Finance, College of Management, Asia University
Ida Fitri Anjasari
Department of Islamic Economics, Faculty of Islamic Studies, Universitas Muhammadiyah Yogyakarta, Special Region of Yogyakarta
Nguyen Tran Thai Ha
Department of Business Administration, College of Management, Asia University, Taiwan, Province of China Faculty of Finance and Accounting, Saigon University, Ho Chi Minh City, Viet Nam
Trinh Thi Huyen Thuong
Faculty of Finance and Accounting, Saigon University, Ho Chi Minh City

Abstract

Monetary policy is closely related to activities to achieve economic growth, which eventually gives welfare to the community. This study aims to analyze the description of the transmission flow of financing channels, the effect of monetary policy instruments, and their effectiveness to achieve economic growth. The variables used are Islamic Banking Finance (FIN), return of Sharia Bank Indonesia Certificate (SBIS), return of PUAS, and Industrial Production Index (IPI). This study used Vector Error Correction Model (VECM) to determine short- and long-term relationships using the time series data. First, the result of the study showed that the transmission flow could not be identified clearly, because the flow stopped in FIN, and it could not affect IPI, according to the Granger Causality test. Second, the result of VECM estimation showed that all variables only affected long term period and did not affect the short-term period. Third, monetary policy transmission of Islamic banking financing channel was not effective enough, which was proven with the result of IRF simulation, which showed that the effect of shock on financing channel variable (FIN) towards IPI was subsided and stable in the 10th period later. Meanwhile, the result of the FEVD simulation showed that the financing channel variable (FIN) only gave a contribution of as much as 0.14 percent towards IPI. The contribution and policy implications are also discussed in this study.

Article Details

How to Cite
Johari, S. M., Wong, W. K., Anjasari, I. F., Ha, N. T. T., & Thuong, T. T. H. (2022). The Effect of Monetary Instrument of Islamic Banking Financing Channel Towards The Economic Growth in Indonesia. Jurnal Ekonomi &Amp; Studi Pembangunan, 23(1), 124–139. https://doi.org/10.18196/jesp.v23i1.13198
Issue
Vol. 23 No. 1: April 2022
Section
Articles

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