THE RISK-TAKING CHANNEL AND MONETARY POLICY TRANSMISSION IN INDONESIA 2004-2011

GIVY, DUHITHA PRIMKA (2013) THE RISK-TAKING CHANNEL AND MONETARY POLICY TRANSMISSION IN INDONESIA 2004-2011. Diploma thesis, UNIVERSITAS ANDALAS.

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Abstract

The risk-taking channeling theory of monetary policy transmission which is explained by Borio and Zhu (2008) and Mishkin (2001) showed that there was problem of weak cost-of-capital in estimate investment spending, it means that interest rate of credit is not the only one factor which influence the investor in borrowing. There are two components of risk-taking channel mechanism, risk behavior and stance size of monetary policy. This study would like to observe factors, which determine the investment loan distributed by commercial bank by adopting model from Satria and Juhro (2011), and to find out whether the monetary transmission policy through risk-taking channel can reported. The empirical result addresses only equity is the significant variable in investment loan equation. In credit investment both GDP and risk level indicators of banking sector are significant. Further, impulse response analysis shows that shock in risk behavior reduce credit investment distributed by commercial banks. Briefly, there is evidence of effectiveness of monetary policy transmission thruogh risk-taking channel in that sample period. Keywords: Monetary transmission, risk-taking channeling, credit investment

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