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INVESTIGATE THE IMPACT OF THE DUAL MONETARY SYSTEM ON REAL SECTOR GROWTH IN INDONESIA
Risa Sari Pertiwi (a*), Sri Herianingrum (b), Irham Zaki (c), Aas Nurasyiah (d), Masrizal (e)

(a,e) Master Programme of Science in Islamic Economics, Faculty of Economics and Business, Universitas Airlangga, Surabaya, Indonesia
(b,c) Department of Islamic Economics, Faculty of Economics and Business, Universitas Airlangga, Surabaya, Indonesia
(d) Department of Islamic Economics and Finance, Faculty of Economics and Business Education, Universitas Pendidikan Indonesia, Bandung, Indonesia


Abstract

This study aims to investigate the impact of the dual monetary policy transmission mechanism from conventional and Islamic policy on the growth of the real sector in Indonesia. We use monthly data from January 2009 to December 2018. This study is a quantitative research that applies Johansen Cointegration Test and Vector Error Correction Model (VECM) to see the long-term impact and response of shocks on certain variables. The findings show the existence of long-term causalities between conventional and Islamic monetary instrument on Industrial Production Index (IPI). In the long run, Interest rate (INT) and Islamic Bank Deposits is positive related to IPI, Conventional Bank Deposits is negative related to IPI, and Financing channeled by Islamic Banks (FINC) have a significant impact on the growth of the real sector in Indonesia. While the profit loss sharing rate (PLS), Total Conventional Bank Credit (LOAN) and Central Bank Certificate (SBI) did not have a significant impact during the observation period. Specifically, in the short term IPI will only be influenced by itself in the previous period. This study can be a reference to the government and monetary authorities for the development of monetary instruments that have a positive impact on increasing the growth of the real sector in Indonesia.

Keywords: Industrial Production Index, Dual monetary system, VECM

Topic: Social and Economic Issues

Link: https://ifory.id/abstract/7F9XGPZm3DQy

Conference: International Conference Postgraduate School Universitas Airlangga (ICPS 2019)

Plain Format | Corresponding Author (Risa Sari Pertiwi)

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