Central Bank Rate Research Articles

Interconnectedness of financial markets in crises in the case of the enlarged BRICS

The article presents a study of the connectivity and integration of sovereign bond and stock markets in 10 BRICS+ countries in the context of crisis instabilities in 2019−2024. Financial markets are becoming more integrated, and an increasing share of public investments are carried out across borders, which increases not only the opportunities for participants, but also the risks of a new crisis. The work used data on central bank rates of the considered countries, yield indices of 10-year government bonds, gold and Brent oil prices. The methods include the analysis of exchange rate dynamics, connectivity estimates based on the multivariate concordance coefficient and two-factor Friedman rank variance analysis, VAR models, Granger predictability and cointegration. The objective of this study is to analyze the interrelationship and cointegration between the sovereign bond and equity markets of selected BRICS+ countries during crisis periods. Our findings indicate that market interrelationship intensifies during crises, which in turn amplifies volatility. Additionally, we observed that none of the economies within the BRICS+ group can be classified as fully integrated or entirely isolated markets. The disruption of the interrelationship in the sovereign bond markets of the group is primarily reflected in the inconsistency of dynamic changes between Russia, China, and India. During the global shock of 2019–2020, the crisis spread from China, followed by Indonesia, and later to the other countries of the group. The financial and debt markets of the sampled countries were able to quickly cope with the severe shocks of the COVID-2019 period. The 2022–2024 crisis, which lasted significantly longer, began in Russia before spreading to countries across Asia and Africa. By 2024, Russia’s sovereign bond yields showed a marked decline. The increased market volatility following 2022 disrupted the integration and interrelationship of the stock and debt markets within the BRICS+ countries.

Monetary Policy Instruments and Financial Performance of the Banking Industry in Kenya

The Kenyan banking sector has faced significant volatility in recent years, notably marked by a decline in Return on Assets (ROA). This decrease reflects the sector's struggles with rising inflation, currency depreciation, and increased non-performing loans. Economic uncertainties and tighter global monetary policies have compounded these challenges, resulting in a more unstable financial environment. This volatility underscores the sector's sensitivity to both domestic and international economic conditions. In response, this research aimed to investigate the effect of monetary policy instruments on the financial performance of banks in Kenya. The study sought to analyze the effect of lending rates, money supply, open market operations (OMO), and the Central Bank Rate (CBR) on banks' financial performance. Anchored on four relevant theories—the Loanable Funds Theory, Quantity Theory of Money, Keynesian Economics, and Zero Bound Theory. The research utilized a causal design and a multiple linear regression model. Covering all 42 banks operating in Kenya from January 2009 to December 2023, the study employed secondary data. The correlation analysis reveals significant relationships between the monetary policy instruments and the financial performance of commercial banks in Kenya. Lending rates demonstrate a positive relationship with financial performance, suggesting that higher rates may benefit banks’ profitability. In contrast, both money supply and central bank rate show negative associations with financial performance, implying that increases in these variables might hinder profitability. Additionally, the analysis indicates a positive link between open market operations and bank performance, highlighting the varied effects of these monetary instruments on the banks' financial outcomes. Collectively, these insights underscore the interconnectedness of these monetary policy instruments and their impact on the financial performance of banks in Kenya. Given the complex interplay of these factors, policymakers should adopt a holistic view, regularly reviewing and adjusting policies to maintain economic stability while supporting a robust banking sector.

INTEREST RATES AND INFLATION AS DETERMINANT FACTORS OF SAVING IN COMMERCIAL BANKS OF NORTH MACEDONIA

This study aims to analyze the effect of the Central Bank of North Macedonia (National Bank), which is in North Macedonia presented by National Central Bank (BI) Rate and inflation rate on the savings rate at commercial banks in North Macedonia by using the analysis tools of autoregressive conditional heteroscedasticity (ARCH) and generalized autoregressive conditional heteroscedasticity (GARCH). The analysis results show that the BI Rate and inflation significantly affect saving rates at commercial banks in North Macedonia. The importance of being a source of investment funds to support development activities can be a consideration for the government to formulate a policy for allocating investment from these savings funds for productive sectors. Practically, it is hoped that the distribution of savings through investment activities can encourage economic growth and increase economic development in North Macedonia.

КЕЙНСІАНСЬКА КРИТИКА НЕЗАЛЕЖНОСТІ ЦЕНТРАЛЬНИХ БАНКІВ

The article is aimed at analyzing the arguments of Keynesianism representatives against the modern paradigm of central banks independence. According to the result of the study, the modern paradigm of independence of central banks is the result of the adoption of a framework for monetary policy in the form of inflation targeting and represents a certain set of indicators of legal and actual protection against political interference in monetary policy. The Keynesian approach to monetary policy is based on an understanding of the principles of the money market, where there is only a natural interest rate and the role of the central bank is usually offset by this. The natural interest rate is defined as the equilibrium rate of the economy with flexible prices and reflects the potential in the dichotomy of “consumption-investment”. In turn, the central bank's rate, which is usually not the same as the natural one, determines the monetary institution's policy of limiting or stimulating economic growth through control of inflation. The central bank is given the role of an auxiliary tool for ensuring economic equilibrium along with fiscal policy or a discretionary body, which adapts to short-term decisions aimed at reducing unemployment. According to Keynesianism in the long term, there is a tendency to neutrality of money and the central bank can only influence demand in the short term. From this position, the implementation of an activist independent monetary policy negatively affects the economic development due to the uneven impact of interest rates on various sectors of the economy; the inability of central banks to “fine-tune” the economy and the inefficiency of interest rates as a tool of monetary policy by incorporating it into the expectations of economic entities. Based on this, the author determined that the role of central banks, according to Keynesian tradition, varies from an auxiliary tool for ensuring economic growth (Phillips curve) to their compliance with systematic, objective rules for limited purposes (price stability and proper functioning of the financial system).

Inflation targeting, exchange rate and output gap in Central and Eastern European countries

This paper aims at empirical assessment of monetary policy relationships in Central and Eastern European countries (Czechia, Hungary, Poland, Romania), which practise the monetary regime of inflation targeting. Using quarterly data for the period of 2004-2019, the authors examined the relationship between the output gap, nominal and real exchange rate misalignment, consumer price inflation and the central bank policy rate, using the panel vector autoregression (PVAR) model. According to estimates, the central banks of the CEE-4 countries react with an increase of their policy rate to the output gap and inflation, as implied by the Taylor rule. At the same time, a monetary reaction to nominal (real) exchange rate misalignment is lost in the estimates for the post-crisis period of 2010-2019. An increase of the central bank rates does not seem to have unfavourable output effects, while the nominal exchange rate is likely to depreciate with three to five quarter lags. However, there is evidence of the price puzzle when monetary tightening is followed by a counterintuitive increase in the inflation rate. In full accordance with the New Keynesian framework, inflation depends on the output gap, while being expansionary in the real sector. Evidence of the exchange rate pass-through (ERPT) to inflation is mixed. This article provides insights into the average monetary policy reaction function and its macroeconomic effects in the CEE-4 countries, with the value added in that following the Taylor rule does not guarantee effectiveness in tackling inflation in the presence of the price puzzle. Based on the estimated exchange rate effects on the output gap and inflation, deliberate currency appreciation resulting from the central bank foreign exchange interventions and/or fiscal austerity measures can be helpful for such a disinflation that minimises output losses.

Does Monetary Policy Influence Non-performing Loans of Listed Commercial Banks in Kenya?

The Kenya banking sector plays a crucial role in Kenya’s economy despite the prevailing macroeconomic headwinds in the Country. The Banking Sector Industry Report of 2023 indicated that the banking sector contributed to 66% of gross domestic product as of December 2022. The high levels of non-performing loans remain a concern in the Kenya banking sector. The study sought to assess the influence of monetary policy on non-performing loans in the banking sector in Kenya. The target population is all listed commercial banks in Kenya. Using monthly secondary data from November 2019 to September 2023 obtained from the Central Bank of Kenya, the study utilized a multiple regression model to estimate the influence of monetary policy on the percentage growth of nonperforming loans of listed commercial banks in Kenya. Findings pointed out that Repo rates and Treasury bill rates do not influence non-performing loans of listed commercial banks in Kenya as measured by the gross non-performing loans ratio as exhibited by the P-values of 0.327866 and 0.577173 respectively, which is greater than 0.05. The results also implied that the central bank rate and interbank rates do influence non-performing loans of listed commercial banks in Kenya as measured by the gross non-performing loans ratio as illustrated by the P-values of 0.028844 and 0.00018 respectively, which is less than 0.05. According to the findings, the study recommends that policymakers should prioritize creating a strong financial ecosystem so that monetary policy can be utilized to regulate commercial bank interest rates. This will, in effect, serve to decrease the expansion of non-performing loans, reduce risk and entice competitors into the financial sector, enhance the capital base, increase lending to promote feasible projects, and, as a result, stimulate the country's growth.

Monetary policy, macroprudential policy, and bank risk-taking behaviour in the Indonesian banking industry

ABSTRACT There is a growing consensus on the translation of monetary policy actions into changes in credit demand on account of changes in interest rates. The study investigates monetary policy, macroprudential policy, bank-specific and macroeconomic determinants of bank risk-taking from 2010–2022 in Indonesia. The study aims to address a gap in the literature because most previous studies have focused on advanced markets. First, three POLS and fixed effect models are estimated. However, the Durbin Wu-Hausman test indicated endogeneity issues with the estimated models. The second stage uses a system GMM estimation to investigate the impact of central bank rates and macroprudential policy on bank risk-taking. Dynamic-GMM estimations find that, partially the central bank rate and macroprudential policy have a positive impact on bank Z-Score. Furthermore, when central bank rate and macroprudential policy are included in a model, we still find a positive impact of both policies on bank Z-Score.

Central Bank Rate Pass-Through Effects on Kenya’s Lending Rate

Several African nations, including Kenya, Nigeria, and South Africa, have seen dramatic shifts in their monetary policy framework and financial environment during the last two decades. To manage and stabilize the economy, the Central Bank of Kenya (CBK) stopped intervening directly in lending low interest rates at financial institutions and instead turned to indirect and market-based measures to carry out monetary policy. Even though it was predictable that a changing financial environment would have a substantial impact on the efficacy of monetary policies, there has not been sufficient research done to determine how IRPT affects lending rates. The purpose of this article was to analyze the pass-through effects of the central bank rate on lending rates in Kenya. The study adopted a non-experimental research design. Data was collected from the CBK, the Kenya Bureau of National Statistics, and the Nairobi Stock Exchange between 2010 and 2021 quarterly data. The study's theoretical underpinning was the loanable funds theory and cost of capital. The cost-of-funds method is based on the conventional marginal cost pricing model for financial markets and helps explain how market prices are transmitted to consumers. The error correction model was used to measure the short-term effect of bank rate changes on Kenyan lending rates. The findings showed that Kenya has an incomplete IRPT which means that increases in the lending rate would be less than proportional whenever there is a change of a specific percentage in the CBR. According to the study, this may be one of the causes of some banks' foreign ownership, their independence from the central bank's liquidity, and their slow reaction times to signals from the central bank to modify lending rates. The study recommends that since commercial banks are a very important component in the transmission mechanisms, they should follow suit in the adjustment of the lending rates.

Implications of the Association Between Forest Cover and the Central Bank Rate of Return on Sustainable Forest Management in Kenya

Implications of the Association Between Forest Cover and the Central Bank Rate of Return on Sustainable Forest Management in Kenya

The impact of monetary policy and credit risk on bank credit behavior: An analysis of banks listed on the Indonesian stock exchange

The study investigates macroeconomic and bank-specific determinants of credit for commercial banks from 2010Q1–2022.Q4 in Indonesia. The banking credit is divided into an investment, working capital, and consumption credits. The study aims to address a gap in the literature since most prior studies are concentrated on developed markets. A system generalized method of moment (GMM) estimator is employed to investigate the impact of central bank rates and credit risk on credit. Dynamic-GMM estimations find that the central bank rate has a negative impact on the three types of credits. Meanwhile, non-performing loans positively impact investment and working capital credits but negatively affect consumption credit. The interaction between central bank rate and non-performing loans negatively impacts investment and working capital credits but positively affects consumption credit. This study provides managers and policymakers with timely information regarding bank credit drivers, encouraging management to take necessary measures, and policymakers may consider the importance of macroeconomic conditions while creating a bank lending policy. Similarly, it informs potential investors on how to evaluate the data when choosing a better investment option.

Interest Rates Capping and Credit Uptake of Commercial Banks in Kenya

In 2016, Kenya enacted the Banking (amendment) Act 2016 which allowed lending interest rates charged by Commercial Banks in Kenya to be fixed at the Central Bank Rate plus a spread of 4% and deposit rates at 70% of the Central Bank Rate. Many banks protested this move since it meant reduced profitability. As a result, commercial banks introduced stringent credit qualification criteria locking out many borrowers who would have otherwise qualified for credit. Therefore, this study sought to establish how interest rate capping affects credit uptake of Commercial Banks in Kenya. The objectives of the study were; to determine the effect of capping lending interest rates, capping deposit interest rates, deposit interest rate spread on credit uptake of commercial banks in Kenya and the moderating effect of inflation risk premium on the relationship between interest rate capping and credit uptake of commercial banks in Kenya. The study was guided by four theories namely: Irving Fisher's Theory of Interest Rates, the Fisher Effect, Loan Pricing Theory and Loanable Funds Theory. The study conducted diagnostic test on multicollinearity normality test and Heteroscedasticity test. The study adopted descriptive research design. The target population for the study was all the 40 licensed commercial banks in Kenya. The sampling frame for the study was all (40) licensed commercial banks in Kenya. This study collected both primary and secondary data because both data reinforced each other. Primary data was collected using semi-structured questionnaires, while secondary data was collected from audited and released financial statements of Commercial Banks in Kenya for the period 2014–2019. The data was analyzed using multiple regressions and descriptive statistics namely: mean median, mode and standard deviation. Quantitative data was presented using tables, pie charts and bar graphs while qualitative data has been presented descriptively. The study established that while capping lending interest rates and interest rate spread had a significant effect on credit uptake of commercial banks in Kenya, capping deposit interest rates was insignificant and the relationship was significantly moderated by inflation risk premium. The study concluded that interest rate spread had the largest effect on credit uptake of commercial banks in Kenya followed by capping lending interest rates and lastly capping deposit interest rates. The study recommends that when formulating policies on interest rate capping, the Central Bank of Kenya should focus more on the lending side as compared to the deposits side. Keywords: Interest rates capping, Credit uptake, Lending interest rates, Deposit interest rates, Interest rates spread, Inflation risk premium.

Статистичний аналіз дохідності державних облігацій з використанням економетричних моделей: макроекономічні та інвестиційні аспекти

Abstract. Introduction. The yield to maturity of government bonds changes over time and depends on a number of external and internal factors. In recent years, the gap between the yield to maturity of bonds of developed countries and countries with relatively low credit ratings has been increasing. Inflation and the level of central banks key rates are important factors that cause fluctuations in the yield of government securities. The yield of government bonds is affected by the terms to maturity. Taking into account the ratio of yield and risk, the longer the maturity of government bonds, the higher the yield should be. But in practice, this dependence can be different, especially in periods of financial crises. All of the above makes relevant the task of analyzing the variation of yield to maturity of government bonds of different countries at the current stage of economic development, as well as the dependence between yield to maturity and the level of inflation on the examples of certain countries and impact on the yield to maturity of government bonds of central bank key rates. The research used such scientific methods as analysis and synthesis of results, logical-analytical methods, methods of descriptive statistics and econometric models. Purpose. The purpose of the paper are improving the approach to the analysis of the yield to maturity of government bonds of various countries and the analysis of the influence of central bank rates on the level of yield to maturity of government bonds. Results. The yield to maturity of government bonds and the rates of central banks of different countries are analyzed. The inverse relationship between the terms to maturity and the level of yield to maturity of government bonds is shown on the examples of the USA and Ukraine. For different samples, taking into account the level of the credit rating of the countries, the analysis of average yield to maturity, dispersion, standard deviation, range of variation, coefficients of oscillation and variation was performed. A high positive correlation was found between the yield to maturity of government bonds and the level of central bank rates. A regression models analysis of the influence of central bank rates on the yield to maturity of government bonds was performed. The linear regression, logarithmic regression and polynomial regression models were constructed. The most qualitative model was chosen on the basis of the coefficient of determination. Conclusions. It was found that developed countries have low (in some countries in certain periods – negative) central bank rates and a low level of yield to maturity. Countries with low credit ratings have high central bank rates and much higher yields. The examples of the USA and Ukraine show an inverse relationship between the yield to maturity and terms to maturity, which indicates the discrepancy between the level of yield and the risk of government bonds in the conditions of financial crisis. A high coefficient of variation for the entire sample of countries indicates a significant dispersion of the data. The average yield to maturity is much higher for countries with relatively low credit ratings and high yield to maturity. The standard deviation differs by more than 8 times for countries with low credit rating, and the range of variation is more than 7 times. Oscillation coefficients and coefficients of variation are also significantly higher for countries with low credit ratings and high yield. All this indicates that for countries with a high credit rating and a low yield, the variation is smaller, the population is more homogeneous, and the average value is more reliable. The linear correlation coefficient indicates a sufficiently high positive correlation between the yield to maturity of government bonds and central bank rates. The results of the regression analysis show that, of all the considered models, the influence of the central bank interest rate on the yield to maturity of government bonds with a maturity of 10 years is best described by the polynomial regression model of the third degree, which has the maximum coefficient of determination. The practical value of the methodical approach to the analysis of the yield of government bonds is that it can be used to assess the influence of various factors on the yield of bonds, as well as to analyze the dynamics of the yield indicators of certain countries' bonds.

Influence of Traditional Cross-border Investment Vehicles on Capital Market Performance: Empirical Evidence from Nigeria and Kenya

This study evaluated the influence of traditional cross-border investment vehicles on the performance of the Nigerian and Kenyan capital markets, for the period spanning from January 2011 to December 2020. Exchange rate, monetary policy rate (otherwise known as the central bank rate in Kenya), inflation rate, crude oil price and credit rating were used as the traditional cross-border investment vehicles while capital market performance was proxied by All Share Index. Ex post facto research design was used in a multiple regression analysis framework to determine the partial effects of the endogenous variables on the explained variable. Pretesting was done using the Augmented Dickey-Fuller method to establish the stationarity of the model variables. The test showed that the data series were of mixed order of integration which necessitated the application of the Autoregressive Distributed Lag (ARDL) model. The ARDL bounds test indicated that the influence of traditional cross border investment vehicles on the performance of the Nigerian and Kenyan Capital markets was bound by a long-run relationship. Specifically, the long-run estimates showed that, whereas the Nigerian capital market was significantly affected by the dynamics of exchange rate and monetary policy more than Kenya, the Kenyan capital market was affected the most by the crude oil price changes and inflation than Nigeria. In terms of credit rating, the Nigerian capital market was largely negatively affected whereas Kenya seemed less volatile. Regarding the speed of adjustment to disequilibrium, it was observed that all the models exhibited an automatic adjustment to equilibrium after very short-run shock. The study concluded that traditional cross border investment vehicles had huge impact on the performance of the two markets and therefore recommended among others that, all the stakeholders should make concerted efforts towards improving the investment climates of East and West African leading stock markets.

Analysis of crises in related economies on the example of Latin American countries

This article provides an analysis of the key macroeconomic and financial indicators of Latin American countries in 2020–2022. The objective is to periodize the behavior of economic indicators in the connected economies of developing countries. The relevance of the study lies in the need to understand the mechanisms of behavior of economic entities in crisis situations. Latin American countries were chosen as a model for the study because they are characterized by a high degree of connectivity, as they all fall into the category of developing countries and differ significantly in the behavior of regulators in crisis conditions. Based on the objective, the analyzed period for the region under consideration was conditionally divided into four stages: the initial panic of 2020, the period of the beginning of recovery at the end of 2020, the recovery of economies against the background of rising inflation in 2021, and a decrease in recovery growth due to instability in 2022. The methodology shows general trends and characteristic deviations caused by general and specific factors. General trends describe the behavior of economic indicators in the selected four stages of the crisis. The deviations show how related economies react to general external shocks in specific conditions. For example, the size of the economy and domestic economic policy have shown themselves as specific factors. The results show that Brazil’s larger economy was more affected by the inflationary shock and took tougher measures with regard to the central bank rate. Throughout the crisis and the subsequent period, Mexico demonstrated a lower unemployment rate and a lower level of government budget losses.

The Short-Run and Long-Run Effects of Central Bank Rate on Exchange Rate Volatility in Indonesia

This research measures the short and long-run effects of central bank policy rate on the volatility of the exchange rate in Indonesia using the quarterly data from Q1 1992 to Q4 2019. The process involves applying an Autoregressive Distribution Lag estimation to investigate the effects of the variables. The exchange rate volatilities include Indonesia Rupiah to US Dollar (IDR-USD), Indonesia Rupiah to Singapore Dollar (IDR-SGD), Indonesia Rupiah to Australia Dollar (IDR-AUD), Indonesia Rupiah to British Pound Sterling (IDR-GBP), and Indonesia Rupiah to Euro (IDR-EURO). Several results were obtained and the first to show the adjustment time for exchange rate volatility to achieve long-run equilibrium was 1.77 quarters to 2.26 quarters using the ARDL estimation. Secondly, a decrease in the central bank rate was found to significantly reduce the exchange rate volatility in the short run and long run. These results are robust since Full Modified Ordinary Least Square (FMOLS) estimation was applied for all five models. Furthermore, it was found that in the long run, the central bank policy rate had a significant positive effect on the volatility of the Indonesia Rupiah against five foreign exchange rates. Therefore, it was suggested that the policymakers need to keep the interest rate of the central bank low and stable to ensure the Rupiah exchange rate stability.

On the Interest Rate Sensitivity of Aggregate Investment in the Euro Zone

The purpose of this paper is to estimate the response of aggregate investment to interest rate changes in the Euro zone. Keynesian macroeconomic theory assumes that there is an inverse relationship between investment and interest rates, but empirical evidence is inconclusive. Interestingly, there are no studies relating macroeconomic investment to central bank rates in the Euro zone, despite the importance of this question for European monetary policy. To check whether the inverse interest rate – investment nexus holds for the Euro zone we conducted a comprehensive econometric study. In particular, we estimated a modified accelerator model that related aggregate investment in levels and the investment-to GDP (gross domestic product) ratio to income, interest rates and a set of control variables. The model was estimated by OLS (ordinary least squares) and simultaneous-equations methods such as TSLS (two-stage least squares) and GMM (generalized method of moments). The study was unable to uncover a significant interest rate effect on investment in the Euro zone. Thus, there is little support for the expansionary monetary policy of the European Central Bank.

Monetary Policy and Financial Performance of Commercial Banks in Kenya

This study has been done to address the research gaps in the effect of monetary policy of commercial bank’s financial performance. The key objectives of the study were to establish the following; the effect of changes in central bank rate on financial performance of commercial banks in Kenya, the effect of reserve ratio requirement on financial performance of commercial banks in Kenya and, the effect of repo rate on financial performance of commercial banks in Kenya. The study was carried out covering a five-year time frame period from 2016 to 2020. The independent variables of the study involved: cash reserve ratio, Central bank rate, and the repo rate. Return on equity was used as the dependent variable. The study used descriptive longitudinal research design. The total population consisted of all the commercial banks, which is forty-two in number, licensed to operate in Kenya by the Central Bank of Kenya. The study employed various research tests; Durbin-Watson, quantile-quantile plot and normality test were applied in research finding analysis. The study found out that a negative relationship exists between both Central Bank rate and cash reserve ratio requirement and return on equity (financial performance) of commercial banks in Kenya. The research findings also showed that a positive relationship exists between repo rate and the return on equity (financial performance) of commercial banks in Kenya. In Conclusion, the study concluded that monetary policy affects profitability and financial performance of commercial banks in Kenya. The study recommends that, for central bank to stimulate economic growth, central Bank rate needed to be monitored and maintained low.

Evaluation of Efficient Ventilation and Natural Lighting in Hospital Wards in Ota, Ogun State, Nigeria

This study has been done to address the research gaps in the effect of monetary policy of commercial bank’s financial performance. The key objectives of the study were to establish the following; the effect of changes in central bank rate on financial performance of commercial banks in Kenya, the effect of reserve ratio requirement on financial performance of commercial banks in Kenya and, the effect of repo rate on financial performance of commercial banks in Kenya. The study was carried out covering a five-year time frame period from 2016 to 2020. The independent variables of the study involved: cash reserve ratio, Central bank rate, and the repo rate. Return on equity was used as the dependent variable. The study used descriptive longitudinal research design. The total population consisted of all the commercial banks, which is forty-two in number, licensed to operate in Kenya by the Central Bank of Kenya. The study employed various research tests; Durbin-Watson, quantile-quantile plot and normality test were applied in research finding analysis. The study found out that a negative relationship exists between both Central Bank rate and cash reserve ratio requirement and return on equity (financial performance) of commercial banks in Kenya. The research findings also showed that a positive relationship exists between repo rate and the return on equity (financial performance) of commercial banks in Kenya. In Conclusion, the study concluded that monetary policy affects profitability and financial performance of commercial banks in Kenya. The study recommends that, for central bank to stimulate economic growth, central Bank rate needed to be monitored and maintained low.

Pengaruh Ekspor, Impor, Cadangan Devisa, Suku Bunga Bank Sentral dan Tingkat Inflasi Nilai Tukar IDR terhadap USD dari Januari 2019 hingga Desember 2021, dibandingkan dengan Studi dari Januari 2011 hingga Desember 2013 per Kasus Dari Indonesia

The aim of this research is to study the influence of independent variables to the fluctuation of IDR exchange rate to USD. Those independent variables are export, import, foreign reserve currencies, Central Bank rate of interest and inflation rate. The population is Indonesia’s economics and the sample is data for three years. Data was analyzed by using multiple regression, the sources of data are from Central Bank (Bank Inonesia) and Central Bureau of Statistics Indonesia. Research objectives are to determine the influence of export, import, foreign reserve currencies, Central Bank rate of interest and inflation rate. The result of this research shows that import make the IDR/USD exchange rate depreciate .BI Rate, foreign reserve currencies significantly influence to the rate of exchange make the Rupiah appreciate. Export and Inflation rate does not influence the IDR/USD exchange rate, because inflation rate in Indonesia is creeping inflation. Compare to the previous study (2014) independent variables which are influence to exchange rate are export, import, reserve, rate of interest

The response of asset prices to monetary policy shock in Indonesia: A structural VAR approach

This paper aims to determine the effect of central bank monetary policy on financial asset prices in Indonesia from 1990 Q1 to 2020 Q4. Furthermore, this study measures the responses of three different asset prices: bond yield, stock price and exchange rate to central bank rate shocks using the structural vector autoregression model. The impulse response functions showed that tightening monetary policy in Indonesia appreciated the exchange rate in four periods, lowered stock prices in five periods, and increased bond yield in all periods. These results imply that an increase in monetary policy interest rate appreciates exchange rate, lowers the stock price, and reduces bond yield. The result of variance decomposition showed that the most dominant central bank rate prediction was in predicting forecast error variance of bond yield but the smallest in predicting forecast error variance of the exchange rate. These results corroborated the hypothesis that tightening monetary policy in Indonesia increases financial asset prices. It also highlighted the informational role of monetary policy interest rate in stabilizing financial asset prices.