Impact of Monetary Policy on Trade Credit and Bank Credit in an Emerging Market Economies: Empirical Evidence in the Indonesia Stock Exchange

Authors

  • Liasulistia Ningsih  Economics, IPB University, Bogor, West Java, Indonesia
  • Noer Azam Achsani  School of Business, IPB University, Bogor, West Java, Indonesia
  • Syamsul Hidayat Pasaribu  International Center for Applied Finance and Economics, IPB University, Bogor, West Java, Indonesia

DOI:

https://doi.org/10.32628/IJSRSET196628

Keywords:

Bank Credit, Monetary Policy, Simultaneous Panels, Trade Credit

Abstract

The global financial crisis of trigger Bank Indonesia to implement a monetary contraction policy by increasing the central bank's benchmark interest rate. This increase in interest rates will increase lending rates which burden creditors. Therefore creditors will shift loan from bank credit to trade credit. This study aims to analyze the effect of monetary policy on corporate credit in the form of bank credit and trade credit as an important source of financing for company profitability by using the simultaneous panel analysis method. The data used are annual data from 2015-2018 with a total cross-section of 109 companies listed on the Indonesia Stock Exchange. The results showed that the increase in interest rates as an indicator of monetary policy could increase lending on trade credit and reduce demand for lending on bank credit. This shows that the type of funding from trade credit has an important role as an alternative source of external financing when the Bank Indonesia implements a monetary contraction policy. The negative relationship between trade credit and bank credit proves that trade credit can be used instead of bank credit.

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International Journal of Scientific Research in Science, Engineering and Technology

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Published

2019-12-30

Issue

Volume 6, Issue 6, November-December-2019

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Research Articles

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How to Cite

[1]
Liasulistia Ningsih, Noer Azam Achsani, Syamsul Hidayat Pasaribu "Impact of Monetary Policy on Trade Credit and Bank Credit in an Emerging Market Economies: Empirical Evidence in the Indonesia Stock Exchange" International Journal of Scientific Research in Science, Engineering and Technology (IJSRSET), Print ISSN : 2395-1990, Online ISSN : 2394-4099, Volume 6, Issue 6, pp.131-139, November-December-2019. Available at doi : https://doi.org/10.32628/IJSRSET196628