Browsing by Author "Lubis, Alexander"
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Item Open Access Gauging the impact of payment system innovations on financial intermediation: novel empirical evidence from Indonesia(SAGE, 2019-06-18) Lubis, Alexander; Alexiou, Constantinos; Nellis, Joseph G.In this paper, the relationship between innovations in the payment systems and financial intermediation is explored. By focusing on excess reserves and currency demand we provide evidence on the extant transmission mechanism. In this direction, a Generalised Method of Moments (GMM) and Vector Error Correction Model (VECM) techniques are applied to a dataset collated for Indonesia. We find that the financial intermediation is affected by currency demand whilst we observe a limited role of excess reserves in affecting financial intermediation. Credit card payments are found to have a statistically significant effect on currency demand, whereas debit card payments only influence the financial intermediation in the long-run. In addition, the Real Time Gross Settlement (RTGS) exerts an upward pressure on excess reserves. The findings are of great importance as they provide support to policies that favour payment migration to an electronic platform, particularly that of card-based payment systems.Item Open Access Implementation of monetary and macroprudential policies: a critical review(Business & Economics Society International, 2017-07-09) Lubis, Alexander; Alexiou, Constantinos; Nellis, Joseph G.The emergence of macroprudential policies by Central Banks, as a means of promoting financial stability, has raised many questions regarding the interaction between them. Given the limited number of studies available, this paper sheds light on this issue by providing a critical and systematic review of the literature. The paper begins with a discussion of the trade-off between price stability and financial stability. We find that financial intermediation acts as the main channel in connecting monetary and macroprudential policies. We find that the theoretical and empirical studies are grouped around four main mechanisms in explaining this interaction: cost of funds, collateral constraint, financial intermediaries and payment systems. By examining these mechanisms, it is argued that monetary policy alone is not sufficient for maintaining macroeconomic and financial stability and macroprudential policies need to supplement monetary policy to achieve price and financial stability. We also find that the role of the exchange rate is critical in the implementation of monetary and macroprudential policies in emerging markets. Volatile capital flows pose another challenge for the implementation of monetary and macroprudential policies. The arrangement of monetary and macroprudential policies also varies across countries, depending on the challenges and institutional arrangements in a particular country. Consequently, a number of implications for theory, policy and practice are proposed.Item Open Access Linking monetary and macroprudential policies in the presence of external shocks: the case of Indonesia.(Cranfield University, 2019-09) Lubis, Alexander; Alexiou, Constantinos; Nellis, JoeThe limited experience of practising monetary and macroprudential policies at the same time raises a question about the extent to which a macroprudential instrument - as a complement to monetary policy - affects the macroeconomic stabilisation in emerging markets, particularly in the presence of external shocks. By performing a systematic review of 125 articles, this thesis provides novel and insightful evidence on the interaction between monetary and macroprudential policies in emerging markets by refining what we already know on the extant relationship. It also provides a comprehensive synthesis of the theoretical arguments on the interaction between the two policy expedients. For the first time, we incorporate in our analysis the impact of policies embodied in the payment system - such as the limitation of the value that can be settled through large-value payment systems - hence making new inroads in the respective empirical literature. Further, it makes evident that a shift from currency - to electronic -based payments supports financial intermediation. In addition to that, the study draws insights from the benefits of FX intervention as an instrument in an emerging market that implements an inflation targeting framework. Not only do we model the risk appetite of investors as a shock to the economy but we also take into account households with limited financial access. As a result, it is demonstrated that FX intervention can be employed by policymakers to stabilise an economy during a period of capital flow shocks. Finally, this thesis advances our knowledge by developing a framework - in the emerging market context - to analyse the impact of using reserve requirements combined with FX intervention as key instruments in an inflation-targeting framework. It suggests that reserve requirement can be utilised by policy makers to complement interest rate policy and FX intervention in stabilising the economy during a period of external shocks, particularly a risk appetite shock.Item Open Access Monetary and macroprudential policies in the presence of external shocks: evidence from an emerging economy(Emerald, 2021-07-22) Lubis, Alexander; Alexiou, Constantinos; Nellis, Joseph G.Purpose This paper examines the impact of using the reserve requirements, combined with foreign exchange (FX) intervention, as key instruments in an inflation-targeting framework. Design/methodology/approach In the context of a dynamic stochastic general equilibrium (DSGE) framework and using Bayesian techniques, the authors estimate a model for the Indonesian economy using quarterly data spanning the period 2005Q2–2019Q4. Findings The reserve requirement is found to assume a complementary role to that of the interest rate policy and FX intervention when used to stabilise the macroeconomy. Originality/value This paper provides a benchmark for other emerging countries that consider adopting the inflation targeting framework and impose an FX intervention as part of their monetary policy.Item Open Access Monetary integration in the ASEAN Economic Community challenge: the role of the exchange rate on inflation in Indonesia(Inderscience, 2018-07-25) Rahadyan, Heru; Lubis, AlexanderThe implementation of the ASEAN Economic Community (AEC) in 2015 required some form of monetary integration, such as exchange rate management. This paper investigates the role of the exchange rate on the inflation rate in Indonesia. Using the monthly data series from 1970 to 2015, we find that the nominal exchange rate affects the inflation rate at a low transmission speed rate. However, the exchange rate volatility and depreciation threshold may accelerate the speed of the exchange rate's transmission to inflation. Thus, studies with short-lagged variables, or studies in different periods may lead to different findings, as shocks and changes in exchange regimes occur regularly in Indonesia. These findings are important as they imply that Indonesia may fail to reach the aims of the AEC if it fails to coordinate its exchange rate policy with the rest of the AEC.Item Open Access Risk appetite and foreign exchange intervention in an inflation-targeting framework: the case of Indonesia(Bank of Indonesia, 2023-03-31) Lubis, Alexander; Alexiou, Constantinos; Nellis, Joseph G.The use of foreign exchange intervention in an inflation-targeting framework raises the question regarding its role. In addition, in an environment of volatile capital flows, how the risk appetite of foreign investors might impact the economy is worth exploring. This paper examines these issues for Indonesia by developing and estimating a dynamic stochastic general equilibrium model. This study finds that the foreign exchange intervention affects the macroeconomic variables through the portfolio channel. The risk appetite also affects the economy by increasing the price of capital. The foreign exchange intervention helps in stabilizing the economy during the presence of risk appetite shocks and monetary policy shocks.Item Open Access What can we learn from the implementation of monetary and macroprudential policies: a systematic literature review(Wiley, 2019-02-21) Lubis, Alexander; Alexiou, Constantinos; Nellis, Joseph G.The emergence of macroprudential policies, implemented by central banks as a means of promoting financial stability, has raised many questions regarding the interaction between monetary and macroprudential policies. Given the limited number of studies available, this paper sheds light on this issue by providing a critical and systematic review of the literature. To this end, we divide the theoretical and empirical studies into two broad channels of borrowers - consisting of the cost of funds and the collateral constraint - and financial intermediaries - consisting of risk-taking and payment systems. In spite of the existing ambiguity surrounding coordination issues between monetary and macroprudential policies, it is argued that monetary policy alone is not sufficient to maintain macroeconomic and financial stability. Hence, macroprudential policies are needed to supplement monetary. Additionally, we find that the role of the exchange rate is critical in the implementation of monetary and macroprudential policies in emerging markets, whilst volatile capital flows pose another challenge. In so far as how the arrangement of monetary and macroprudential policies varies across countries, key theoretical and policy implications have been identified.