Transmission Mechanism on Dual Monetary System in Indonesia: Comparison Between Shariah and Conventional Instruments

Abstract

The transmission mechanism of monetary policy has been an area of abundant economic research in many countries. The financial system links monetary policy and the real economy. Thus, events or trends that affect the financial system can also change the monetary transmission mechanism. This study tries to analyze transmission mechanism in Indonesian dual monetary system, using Vector Auto Regression (VAR) and Vector Error Correction Model (VECM) methods.

Results show that the relationship between LNIHK and shariah instruments: financing (LNFINCG), SBIS and PUAS is negative. It means, when the total of shariah financing be increase, it will gives positive contribution for reducing inflation rate in Indonesia, because with this system possibility to make equal growth among monetary and real sectors appears. Therefore, it will be strategic action for monetary authority to grow up shariah banking share in Indonesia, for minimizing ‘bad inflation’ in economy.

JEL Classification: C32, E31, E42, E52

Keywords: Transmission Mechanism, Dual Monetary System, Shariah Instruments, VAR/VECM

1. FOREWORD

1.1. Background

The problem on money is a complex one. It relates to almost every aspects in economic. Because of that, the process in making monetary policy that can get through real sectors becomes a complex problem too. This process commonly known as transmission mechanism on monetary policy. This mechanism is a channel between monetary policy and economics (Pohan, 2008). Bernanke and Gertler stressed on credit channel, while Obstfeld and Rogoff stressed the concepts of transmission mechanism on value exchange policy (McCallum in Hardianto, 2004). Some economists agreed that transmission mechanism is a process between the cause of changing real GDP and inflation through monetary policy mechanism.

Monetary authority in Indonesia, Bank Indonesia, uses interest rate instrument (SBI) in open market to influence the demand of loan which at last influence aggregated demand. Monetary transmission mechanism by interest rate start from short term rate to medium and long term rate (Warjiyo, 2003). When tight money policy is in use, the increase of interest rate will make banking-related sectors decreasing due to price lifting.

The increase of interest rate soon followed by decreasing in banking-related sectors because lender’s risks is increasing while lender’s income is decreasing. In other condition, uncompleted substitution between bonds and loan will make both instruments become coexisting to each other.

It happens because lender’s risks is increasing and lender’s income is decreasing. In condition where uncompleted substitution happens between bonds and loan, both instruments become coexistence to each other. Even so, the increase of interest rate doesn’t change lender’s business pattern from investments into bonds. In other condition, tight money policy will swing lender’s pattern of business from risky loan to safe bonds which soon followed by decreasing of aggregated demand because investors or lenders cut off their investments (Hardianto, 2004)

Since 1992, when the first shariah banking in Indonesia, Bank Muamalat, was established, there are dual banking system: interest rate system and free interest rate system. It was marked by the forming of SWBI (Wadiah Certificate of Bank Indonesia) instrument. This instrument base on the concept of profit sharing that gives flexibility to lenders in it. With this system, the increase of money in market will followed by the increase of real sectors.

It is possible that he existence of profit sharing system will swing consumer from interest rate to free interest rate system. Nevertheless, this mechanism substitution will also influence monetary policy and reduce negative effects due to loan decreasing in conventional system as impact of loan increasing in free interest rate system that balances the growth in monetary sectors and real sectors. They’ll all add shariah loan proportion in economics which give pressure on inflation rate.

This paper tries to identify monetary transmission process in Indonesia, which applies dual monetary system, by comparing financing and credit in conventional banking. It tries to prove whether shariah financing mechanism, especially in production, is capable of balancing the growth monetary and real sectors to keep inflation rate low. It also tries to measure the shariah monetary instruments’ effectiveness in generating real sectors.

2. THEORY

2.1. The Concepts of Transmission Mechanism in Monetary Policy

Transmission mechanism in monetary policy, basically, is a channel connecting monetary policy and economy. This mechanism started since Bank Indonesia use this mechanism as part of its monetary policy that influence economy activities, directly or indirectly. The effects of this action come from money, interest rate, credits, currency exchange, assets and expectacies channel (Pohan, 2008).

Because of its complex system, in monetary economy theory, the transmission mechanism is known as “black box” (Mishkin in Pohan, 2008) because monetary transmission is influenced by three factors:

1.      the changing of business pattern by Bank Indonesia, banks, businessmen in their economic and financing activities.

2.      Time lag between monetary authority’s first act and its final economic goals.

3.      the changing of monetary transmission channeling according to the growth of economy in one country.

In traditional and closed economic system, banks are all that matters, the relation between money in market and real economy activities is tight. But, this relation is loosening when economic and financing activities grow. Most of the capital in banks distribute only in financing sectors, not in real sectors. This will effect on time lag of transmission mechanism in monetary policy.

In global sense, the economic growth of a country influenced by economic grrowth of other countries through currency exchange, export and import activities, and capital flow. Transmission mechanism channeling (interest rate, credits and currency exchange) then become more important, including bonds, stocks and expectacies.

2.2. The Phases of Monetary Transmission

Basically, monetary transmission mechanism is interaction between central bank of a country and banks and other stokeholders of the system in real sectors. This interaction applies through two phases of money distribution. First, interaction between central bank and others in money market transactions. Second, interaction in sense of intermediating function of banks with businessmen in real economy sectors.

The first phase interaction in money market take place in indirect monetary controlling system which is common through money market. In one side, central bank makes monetary activities in its investment plans. This activities take place in money market and will influence the volume and asset price (interest rate, exchange rate, bonds and stocks).

The second phase interaction involves both banking system and businessmen in real economy sectors. In this context, banks plays the role as intermediating institutions that distributing third party’s saving in form of credits and other financing. This interaction will influence interest rate, volume of savings and deposits as part of money circulation M1 (in narrow sense) and M2 (in wide sense).

When banks need to increase volume of savings and deposits, they will increase interest rate in order to attract consumer’s to save or deposit their money in banks. This kind of interaction influence the increase of financing of banks. When banks need to expand credits, they will decrease interest rate in order to lure third-partied to make loan from banks.

2.3. Channeling of Monetary Transmission Policy

As mentioned above, along with the growing of economic structure and financing, there are at least six transmission mechanism in monetary policy that mentioned in contemporer monetary theory. They are direct monetary channel, interest rate channel, asset price channel, credit channel and expectation channel.

a. Direct Monetary Channel

Direct monetary channel refers to classic theory about the function of money in economics which explained by Fisher in Quantity Theory of Money. Basically, this theory describes exact mainframe of direct relation analysis between money in market and price which stated in popular formula: MV = PT.

Volume of money that circulate in market which is used in all economic activities (MV) equals as volume of value that being transactioned in all economic activities. This theory emphasizes that demand of money by consumers merely bases on ecomonics activities. This theory then revised by Keynes which emphasizes that consumers’ motive on money bases on not only transaction, but also on precaution and speculation.

b. Interest Rate Channel

Different from direct monetary channel, interest rate channel emphasizes on the urgent of price aspects in money market on many economics activities in real sectors. Related to this, monetary policy by central bank will give effect on other growing interest rate in financial sector and finally on inflation rate and real sector. On first phase, central bank action will influence short term interest rate (central bank interest rate and interbanks money market). On following phase, it influence deposit rate offered to consumers and credit rate to third-partied. Usually this process happens gradually with time lag, especially due to internal factor of banks in asset management.

On next phase, transmission of interest rate from finance sector to real sector depends on its effects on demand and investment. As for demand, the impact of interest rate related to interest function as income effect on comsumers income and substitution effect on comsumers expense. As for investment, the impact of interest rate related to interest rate as cost of capital, beside yield bonds and stocks share. They give impact on aggregated demand which then determine inflation rate and real sector.

c. Credit Channel

transmission mechanism in monetary policy approach through credit channeling base on that not all public savings in money (M1 and M2) distributed by banks in credit. In other words, the function of banks as lender (intermediator) is not performed as it should be. This means, the increase of consumers’ savings is not always followed by the increase of credit for third-partied. So, credits give more impact on real sector, not savings.

On first phase interaction between central bank, banks and real sector, interaction takes place in domestic money market. It influence not only short term interest rate, but also volume of money distributed by banks in liquidity instruments and in credits. The next phase, it happens from banks to real sector through credits which influeced by several intern or extern factors of banks. The increase of credit then give effect on real sector which are consumption, investments and productions. Then it followed by the increase of commodities and services.

d. Asset Price Channel

The changing of asset price, financially (bonds and stocks) and physically (properties and gold), directly influenced by monetary policy. This transmission happens because investors put their investments in form of savings in banks, but also in form of other instruments such as bonds, stocks and physical assets. The changing of interest rate and currency rate give efffect on volume of transaction and price of bonds, stocks and physical assets. Then it effects on real sector: demand in consumption base on wealth effect or substitution and income effect.

It effects on other real sector is investment demand that related to asset price changing impact on capital expense in production and investment which soon influnce aggregated demand, output and inflation rate.

e. Expectation Channel

In monetary policy context, public’s expectation of inflation is the most concerned thing. Expectation theory says that if public is being rational, they will anticipate the possibility of inflation in form of reducing volume of money in their hands by buying goods. This kind of expectation gradually push the increase of interest rate. If the increase of interest rate lower than the increase of price, rate of return on financial assets will decrease. This will lead public to transform their wealth from financial assets to real assets.

Source: Warjiyo (2003)

Picture 2. 1. Monetary Transmission Channel

2.4. Advanced Research

These are the important characteristics of transmission mechanism in several countries, developing and developed ones.

Table 2. 1. Transmission Mechanism in Several Countries

Countries	Important Characteristics
Developing Countries
Brazil	Interest rate influences inflation with 6 months minimum lag and the emerge of fast pass-through effect on exchange rate.
Chili	Index pushes downward price inertia and speed up the transmission process (around the 1st, 2sd and 3rd trimester) from exchange rate shock nilai tukar and wage to inflation.
Cheska	Transmission mechanism is weakened by fragility of financial sector.
Israel	Index pushes fast pass-through effect on exchange rate to speeding up price. Latest reportshowed that its impact last longer.
Poland	Credit chanel transmission is not strong enough due to non-developing money market and banks sectors.
South Africa	Interest rate influences inflation with minimum lag, while relation between circulated money and inflation is too weak.
Developed Countries
Canada	Transmission mechanism is well-developed with minimum lag between 6 – 8  trimester and varied from time to time.
Finland	Transmission to flexible exchange rate weakens transmission mechanism and adds volatilities of exchange rate.
New Zealand	Transmission mechanism is well-developed with minimum lag between 6 – 8  trimester and varied from time to time.
Spain	Real exchange rate is the most important transmission channeling.
Swedia	Transmission mechanism is well-developed with minimum time lag between 5 – 8 trimester.
England	Monetary policy gives maximum effect on output after one year and on inflation after two years.

Source: Pohan, 2008

Several countries, such as Canada, New Zealand, England and Sweden, have well-developed transmission mechanism, while in most emerging market (developing) countries, such as Brazil, Chili and Israel, with high inflation rate, transmission characterized by downward price stickiness and speeding up pass-through effects from exchange rate to inflation is dominating.

On the other side, there is research on shariah monetary transmission by Hardianto (2004). With the case of shariah economics application in Indonesia, he concludes:

1.      There is no substitution mechanism between conventional system and shariah system in finance products.

2.      Shariah banking’s finance has positive relation to IHK inflation.

According to his research, the balance that supposed to happen between monetary side and real economics side fails because the growth in shariah banking finance is not followed by the same relation on real economics side.

Other research conducted by Nikmawati (2007) found that shariah financing can reduce negative effects of interest rate on inflation after sixth month. But, on the other hand, substitution mechanism between shariah financing and conventional credits doesn’t happen when interest rate increases. Nikmawati made her research base on shariah economics application in Malaysia.

The different between these two researches are: first, and the most important thing, is Hardianto’s research try to identify the relationship between several monetary instruments, whether in shariah or in conventional, and inflation. Hardianto uses variables from Wadiah Certificate of Bank Indonesia (SWBI), so in his research, he put shariah SBI since April 2008 as data. Second, Hardianto uses data with the case of Indonesia’s shariah economics, while Nikmawati with the case of Malaysia’s shariah economics. Third, Hardianto uses very wide data from 2002 to mid 2008.

3. DATA AND METHODOLOGY

3.1. Type and Source of Data

Data used in this paper is secondary data in form of monthly time series from Indonesia Statistic on Economics and Finance of Bank Indonesia (SEKI-BI), Shariah Banking Statistics (SPS) and Indonesia Banking Statistics (SPI). All data starts from January 2003 to March 2009. As dependent variable, it takes proxied inflation rate using consumer price index in Indonesia. Shariah Banks Finance in total (LNFIN) is the amount of finance issued by shariah banks minus shariah unit for small and medium enterprises (BPRS), while conventional credits in total (LNLOAN) is proxied with the amount of credits in total issued by conventional banks in rupiah. The interest rate is based on interbanks money market (PUAB) for all maturities and Bank Indonesia Certificate. On the other hand, aggregated sharing rate is using shariah sharing proxy rate (SBI Syariah) and shariah interbanks money market (PUAS).

3.2. Estimation Methode

The problems in the study is analysed by Vector Autoregression (VAR). VAR simply illustrates the intervariable causative relation in the system by adding intercept. This method developed by Sims in 1980 (Hasanah, 2007) which considered all variables in system is endogenistic (defined in system) so this method is known as atheoretically model (non-theory base).

If data being used is stationary in first difference, VAR model will be combined with correction on fault model and becomes Vector Error Correction Model (VECM). Impulse response function analysis is being made to see the response of endogenistic variable on other variable shocks in model. Variance decomposition analysis is also being made to find relative contribution of variable in explaining variability of endogenous variable.

Source: Ascarya, et al. (2008)

Picture 3. 1. Process in VAR Analysis

4. RESULT AND ANALYSIS

4.1. Result of Stationarity Data Test

As mentioned above, for stationarity data test, this study uses ADF (Augmented Dickey Fuller) and Phillips-Perron test using 5% real level. If t-ADF and t-PP smaller than critical point of McKinnon, we can conclude that data is stationary (does not have unit root).

Table 4. 1. Result of ADF Test and Phillips-Perron

Variables	ADF		Phillips-Perron
	Level	1st Difference	Level	1st Difference
LNIHK	-2.423450	-5.663500	-2.637343	-5.871732
LNFIN	-1.554025	-2.680790	-1.382850	-6.400608
LNLOAN	-1.673123	-3.338888	-2.010937	-3.901421
SBIS	-4.108225	-11.59796	-3.878715	-14.40888
SBI	-2.712136	-3.341923	-2.337240	-3.289521
PUAS	-4.108077	-11.60642	-3.879208	-14.41468
PUAB	-2.625126	-8.228705	-2.668365	-8.222490

Note: Bold shows that data is stationary on McKinnon critical points of 5%.

Test on these root of units is being conducted on level to first difference. On ADF test, certain variables on this study achieve stationary level, which are SBI Shariah and shariah interbanks money market (PUAS). After first difference test, we can see that all data is stationary on real level of 5%. The same results is shown from Phillips-Perron test. It means, all data is integrated on ordo one or in short I(1). The root of units results is shown on table 4.1.

4.2. The Standard of Lag Optimum

The test on lag optimum is very useful to abolish autocorrelation problems in VAR system. We can hope that this problem will not emerge anymore by using lag optimum test. The standard of lag optimum we use in this study based on shortest lag by using Akaike Info Criterion (AIC). The results show that equilibrium model reaches lag optimum on lag 2 (table 4.2).

Table 4. 2. The Results of Lag Optimum Test

Lag	LogL	LR	FPE	AIC	SC	HQ
0	512.3337	NA	1.89e-15	-14.03705	-13.81570*	-13.94893
1	591.2005	140.2077	8.30e-16	-14.86668	-13.09594	-14.16174*
2	656.2443	102.9859*	5.51e-16*	-15.31234*	-11.99220	-13.99058

Note: Asterix mark (*) show the smallest AIC.

4.3. Results of VAR Stability Test

VAR stability needs to be tested first before conducting further analysis because if it indicates unstability combined  with fault correction model, Impulse Response Function and Variance Decomposition is no longer valid (Setiawan, 2007). To test the stability (or not), we can check on stability VAR condition in form of roots of characteristic polynomial. VAR system considered stable when all of its roots have smaller modulus than one (Gujarati, 2003). Base on VAR system test, we can say that VAR estimation for IRF and VD analysing is stable. After being tested, we conclude that formed VAR model is stable on its lag optimum.

4.4. Results of Co-Integrated Test

We run this test in order to get long term intervariables relationship that qualified during integration process, which are all variables is in stationary mode on the same level, level 1 or I(1). The long term information firstly achieved by defining co-intergrated rank to find out how many equilibrium system of the whole system can explain the relationship. Co-intergrated test results based on trace statistics shows that there are three co-intergrated rank on real level of 5%.

Table 4. 3. Results of Co-Integrated Rank

Hypothesized No. of CE(s)	Eigenvalue	Trace Statistic	0.05 Critical Value	Prob.**
None *	0.585634	189.0110	125.6154	0.0000
At most 1 *	0.458349	125.5786	95.75366	0.0001
At most 2 *	0.405465	81.43301	69.81889	0.0045
At most 3	0.278737	43.99479	47.85613	0.1101
At most 4	0.170890	20.46870	29.79707	0.3916
At most 5	0.092292	6.975758	15.49471	0.5805
At most 6	5.25E-05	0.003783	3.841466	0.9497

4.5. Impulse Response Function Analysis

After all pre-estimation test series (roots of unit test, standardization of lag optimum, VAR stability test and co-intergrated test), the fact is there are two co-intergrated rank in real level of 5% in this model. So, we have to make further calculation for next phase, VECM. VECM estimation is being made to find out short and long term analysis. Following is Impulse Response Analysis Simulation (IRAS). The substance results of impulse response function analysis for dual monetary transmission model in Indonesia is shown on table 4.4 below.

Table 4. 4. Response on Comsumer Price Index

Variable Shocks	Response of LNIHK
LNFIN	Negative and permanent -0.004, stable on 16th term
LNLOAN	Positive and permanent 0.006, stable on 15th term
SBIS	Negative and permanent -0.003, stable on 18th term
SBI	Positive and permanent 0.003, stable on 15th term
PUAS	Negative and permanent -0.003, stable on 16th term
PUAB	Positive and permanent 0.002, stable on 17th term

Table 4. 4. shows responses of consumer price index (LNIHK) on other variables shocks are up and down. We can see that LNIHK gives negative response 0.4% on one deviation standard of shariah banking finance variable shock. It means, the higher shariah banking finance the more positive it influence on the decrease of inflation rate in Indonesia. It proves and as a cross-checks on previous research by Hardianto performed in 2004. The reason that shariah banking finance weakening inflation rate is because shariah banking finance, especially productive finance base on profit sharing, enables the balance growth between monetary sector and real sector. This balance due to profit and lost sharing principle.

Meanwhile, the relationship between LNIHK and LNLOAN is positive. We can say that the higher credits finance issued by conventional banking entities the higher its impact on inflation. The same applies to other conventional monetary instruments: SBI and PUAB. This conclusion is the same with the research of Ascarya (2009). According to him, interest rate instruments, SBI, is the most determinant factor in Indonesia. It become the biggest factor among other variables in the same model.

If we look at the results of other impulse response function (IRF), SBI variable shock response negatively by shariah banking finance. It means, the higher SBI the lower shariah banking finance. It merely because when monetary authority raise interest rate, it soon trigger conventional banking finance to raise their interest rate too (financings, savings or deposits). This impacts directly on shariah banking competitiveness. Profit sharing that offered by them become less competitive compare to interest rate on savings and deposits. Final impact, it is possible the finance and DPK of shariah banking weaken and their market share is losing.

Picture 4. 1. Respons of LNIHK on Several Monetary Instruments

Consumer price index variable (LNIHK) can get stability in responding LNFIN shock after 16th term dan begins stable in responding LNLOAN shock on 15th term. While in shariah banking, LNIHK stable on 18th and 16th term. SBI variable and PUAB positively responsed by LNIHK and stable after 15th and 17th term.

4. 6. Variance Decomposition Analysis

After making analysis on dynamic behaviour through impulse response, we can continue on characterizing model through variance decomposition. As we can see in picture 4. 2., up and down of consumer price index (LNIHK) influenced dominantly by LNIHK itself. LNLOAN is in second starts from 3rd to 36th term and LNFIN is in third. LNIHK is also influenced by SBI, PUAS and shariah SBI with around 3% contribution. Meanwhile, the least influence is coming from PUAB that even hardly influence LNIHK at all.

On first term, up and down of LNIHK influenced by LNIHK shock as much as 100%. In the next term of interval prediction, the influence of LNIHK is lowering, but still the most dominant. Then LNLOAN variable influence becomes second. On 36th term, LNIHK can be explained with LNLOAN, PUAB and SBI with contribution point of 20.6%. On the same term, LNFIN, PUAS dan shariah SBI contribute only 12.9% to LNIHK.

Picture 4. 2. Variance Decomposition of Consumer Price Index

In general, the contribution point LNIHK in explaining itself starts from 20th term up to 36th term in 67%.

5. CONCLUSION AND RECOMMENDATION

5. 1. Conclusion

According to research on transmission mechanism on dual monetary system in Indonesia, we have several conclusion, which are:

1. If we look at variance decomposition structure, variables that contribute on consumer price index (LNIHK) in order: credits of conventional banking variable (LNLOAN for 15.1%), shariah banking finance (LNFIN for 6.7%), SBI for 3.4%, PUAS for 3.2%, SBI Syariah for 3% and PUAB for 2.1%. This results show that conventional monetary instruments—LNLOAN, SBI and PUAB—give more contribution (20.6%) on inflation (LNIHK) compare to shariah instruments (LNFIN, SBIS and PUAS that contribute only 12.9%). It is so common dan understandable because at this moment conventional market share a lot bigger than shariah market share (approximately only 20% of total market share).
2. Results from impulse response function (IRF) prove that LNIHK negatively response to shariah banking finance variable (LNFIN). It means, the higher the amount of shariah finance in Indonesia the more positive and influential of its impact on inflation in Indonesia. That is because shariah finance, especially for productive finance base on profit sharing principle enables the balance growth between monetary sector and real sector. This balance due to profit and lost sharing principle.
3. Meanwhile, the relationship between LNIHK and LNLOAN is positive. We can say that the higher credits finance distributed by conventional banking entities the higher its impact on inflation. The same applies to other conventional monetary instruments: SBI and PUAB. This conclusion is the same as previous research andthe same as the research of Ascarya (2009) which explains that interest rate instruments, represented in SBI, is the most determinant factor of inflation in Indonesia. It become the biggest factor among other variables in the same model.
4. It is very interesting to note the relation of six variables in monetary instruments between conventional (LNLOAN, SBI and PUAB) and shariah banking (LNFIN, SBIS and PUAS). All monetary instruments in shariah is responsed negatively by LNIHK and all conventional instruments is responsed positively by LNIHK. We can say that conventional monetary instruments tend to raise inflation in Indonesia, while, on the contrary, shariah monetary instruments tend to lower inflation in Indonesia.
5. If we look at the results of other impulse response function (IRF), SBI variable shock response negatively by shariah banking finance. It means, the higher SBI the lower shariah banking finance. It merely because when monetary authority raise interest rate, it soon trigger conventional banking finance to raise their interest rate too (financings, savings or deposits). This impacts directly on shariah banking competitiveness. Profit sharing that offered by them become less competitive compare to interest rate on savings and deposits. Final impact, it is possible the finance and DPK of shariah banking weaken and their market share is losing.

5. 2. Recommendation

There are some recommendations from this study:

1. Conclusion of the study says the higher shariah finance in Indonesia, the more positive of its influence to inflation rate in Indonesia. We recommend that it is very strategic for shariah banking stakeholders or authorities to develop shariah market share as a component to control and minimize inflation and negative impacts to minimal level from conventional economics market.
2. We also find that conventional monetary instruments, especially bank’s credits (LNLOAN), SBI and interbank money market tend to raise inflation. Therefore, it is worthed to review the effectiveness of conventional system to reach economics stability and balance between monetary sector and real sector.
3. If goverments and monetary authorities have serious willingness to flourish banking system base on profit sharing, there is a way and effort to support it by making interest rate of SBI as lower as possible. This is because shariah banking relatively unable to compete in high interest rate economics system.
4. Of course, there are some lackages in this study, such as: we need to find other channel in shariah monetary transmission in Indonesia to make it more comprehensive. Other than that, it is nice if we put equivalent rate variable into profit sharing system compare to interest rate of credits in conventional system to make us clear about monetary transmission on dual monetary system in Indonesia.

BIBLIOGRAPHY

Ascarya, Hasanah, Heni and N.A. Achsani, “Permintaan Uang dan Stabilitas Moneter dalam Sistem Keuangan Ganda di Indonesia,” Paper presented at “Seminar dan Kolokium Nasional Sistem Keuangan Islam II”, Bandung, Indonesia, 6 September 2008.

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Gujarati, Damodar, (2003), Basic Econometric. Jakarta: Erlangga.

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Mankiw, N. Gregory, (2003), Macroeconomic Theory 5^th Edition. Jakarta: Penerbit Erlangga.

Nikmawati, Khulailatun, (2007), Mekanisme Transmisi Melalui Sharia Financing, Analisis Vector Autoregression (Studi Kasus Negara Malaysia), Islamic Economics Department, Tazkia Islamic Business School, Bogor.

Pohan, Aulia, (2008), Kerangka Kebijakan Moneter dan Implementasinya di Indonesia, Jakarta: PT Raja Grafindo Persada.

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(Paper ini telah dipresentasikan dalam International Conference on Islamic Banking and Finance (ICIBF) 2010 on Risk Management, Regulation and Supervision. Organized by Islamic Research and Training Institute (IRTI) Islamic Development Bank (IDB) jointly with Bank of Indonesia and PEBS-UI. Bumi Karsa Bidakara Hotel Jakarta, 23-24 February 2010)