Regional economic structure and heterogeneous effects of monetary policy: evidence from Indonesian provinces
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 t...
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| Format: | Article |
| Language: | English |
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SpringerOpen
2022-01-01
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| Series: | Journal of Economic Structures |
| Subjects: | |
| Online Access: | https://doi.org/10.1186/s40008-021-00260-6 |
| _version_ | 1818964148758773760 |
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| author | Harry Aginta Masakazu Someya |
| author_facet | Harry Aginta Masakazu Someya |
| author_sort | Harry Aginta |
| collection | DOAJ |
| description | 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. |
| first_indexed | 2024-12-20T12:56:31Z |
| format | Article |
| id | doaj.art-775c23b3ea804ed68fdc332952d4f84a |
| institution | Directory Open Access Journal |
| issn | 2193-2409 |
| language | English |
| last_indexed | 2024-12-20T12:56:31Z |
| publishDate | 2022-01-01 |
| publisher | SpringerOpen |
| record_format | Article |
| series | Journal of Economic Structures |
| spelling | doaj.art-775c23b3ea804ed68fdc332952d4f84a2022-12-21T19:40:04ZengSpringerOpenJournal of Economic Structures2193-24092022-01-0111112510.1186/s40008-021-00260-6Regional economic structure and heterogeneous effects of monetary policy: evidence from Indonesian provincesHarry Aginta0Masakazu Someya1Bank Indonesia and Graduate School of International Development, Nagoya UniversityGraduate School of International Development, Nagoya UniversityAbstract 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.https://doi.org/10.1186/s40008-021-00260-6Monetary policy transmissionEconomic structureInflationIndonesiaE52R11 |
| spellingShingle | Harry Aginta Masakazu Someya Regional economic structure and heterogeneous effects of monetary policy: evidence from Indonesian provinces Journal of Economic Structures Monetary policy transmission Economic structure Inflation Indonesia E52 R11 |
| title | Regional economic structure and heterogeneous effects of monetary policy: evidence from Indonesian provinces |
| title_full | Regional economic structure and heterogeneous effects of monetary policy: evidence from Indonesian provinces |
| title_fullStr | Regional economic structure and heterogeneous effects of monetary policy: evidence from Indonesian provinces |
| title_full_unstemmed | Regional economic structure and heterogeneous effects of monetary policy: evidence from Indonesian provinces |
| title_short | Regional economic structure and heterogeneous effects of monetary policy: evidence from Indonesian provinces |
| title_sort | regional economic structure and heterogeneous effects of monetary policy evidence from indonesian provinces |
| topic | Monetary policy transmission Economic structure Inflation Indonesia E52 R11 |
| url | https://doi.org/10.1186/s40008-021-00260-6 |
| work_keys_str_mv | AT harryaginta regionaleconomicstructureandheterogeneouseffectsofmonetarypolicyevidencefromindonesianprovinces AT masakazusomeya regionaleconomicstructureandheterogeneouseffectsofmonetarypolicyevidencefromindonesianprovinces |