Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/261629 
Year of Publication: 
2022
Citation: 
[Journal:] Journal of Economic Structures [ISSN:] 2193-2409 [Volume:] 11 [Article No.:] 1 [Publisher:] Springer [Place:] Heidelberg [Year:] 2022 [Pages:] 1-25
Publisher: 
Springer, Heidelberg
Abstract: 
We analyze how regional economic structures affect the impact of monetary policy on rates of inflation across 34 Indonesian provinces. The paper first applies structural factor augmented vector autoregressive model (SFAVAR) to all the 34 provinces based on monthly provincial data in order to measure the length and magnitude of responses of regional inflation to monetary policy shock, derived from the consequential impulse response functions of 34 provinces. In the second step, we analyze the impact of economic structures on the length and magnitude of regional inflationary responses of 34 provinces. We find that the impacts of monetary policy across regions are significantly influenced by economic structural variables such as manufacturing sector share to GDP, mining sector share to GDP, bank lending share to GDP and export share to GDP. In addition, we found the spatial lag, rate of inflation of neighboring provinces, is also statistically significant. In a similar fashion, economic structural variables such as manufacturing sector share to GDP, construction sector share to GDP and investment share to GDP are found statistically significant in explaining regional differences of monetary policy efficiency. Our findings imply economic structures of provinces have to be incorporated to designing monetary policy in Indonesia.
Subjects: 
Economic structure
Indonesia
Inflation
Monetary policy transmission
JEL: 
E52
R11
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.