around 4,170,731 billion. This greatly influenced the
development of the price of other assets such as the
SBI in 2012 and 2014 is declining while the SBIS in
2014 rising high in the follow with the development
of conventional bonds and Islamic bonds.
2 THEORICAL FRAMEWORK
The transmission mechanism of monetary policy is a
process where a policy can affect economic growth
and inflation in a country, the transmission channels
of monetary policy is carried out through six
channels namely interest rates, credit, the company's
balance sheet, assets prices, exchange rates and
expectations.
According to Dornbusch, et al (2004), the
monetary policy affects the economy, first, by
influencing interest rates then affect aggregate
demand. The increase in the money supply lower
interest rates, increasing investment spending and
aggregate demand, and therefore increase the
equilibrium output.
Indonesia began to adopt the dual banking
system after the banking policy issued in 1998 Act
No. 10 of the double-banking, (Dahlan Slamat,
2005:407). The dual banking system is the
application and enforcement of this two banking
systems (conventional or public bank system that
operates with the flowers and the banks that operate
with the Sharia system side by side), which
generally also not limit of conventional commercial
banks in providing Islamic services through
mechanisms of islamic window by first forming the
Syariah Business Units (UUS).
Specifically, Taylor, 1995 (in Warjiyo, 2004)
stated that the mechanisms of monetary transmission
to bijakan is “the process through which monetary
policy decision are transmitted into changes in real
GDP and inflation”. This means that the
transmission Mechanism of monetary policy is the
paths traveled by the monetary policy to be able to
influence the final target of monetary policy, namely
national income and inflation.
Monetary policy through the price of the asset
can be via two channels i.e. channel wealth (the
wealth effect) and Tobin-q (Mishkin: 1955). Lines
of wealth (the wealth effect) affects the level of
consumption, and consumption affect aggregate
demand, aggregate demand and further affect the
output gap and ultimately affect the rate of inflation.
Asset prices through the channels on the Tobin-q
will affect the level of investment and the impact on
aggregate demand and ultimately influence the
inflation rate. In this context, the channel-a channel
that gives the stress on the transmission mechanism
of monetary policy is Tobin's theory and the
influence of wealth (the wealth effect) of
consumption. Through Tobin's q theory, if q is
defined as the relative market value of companies-
companies that can purchase a variety of fixtures by
simply issuing equities, and vice versa.
The role of asset price in the transmission
mechanism of monetary policy is known
theoretically, though difficult to illustrate
empirically. Monetary policy shocks results in
fluctuations in the price of assets with monetary
policy can boost stock prices in two ways namely by
making equities relatively more attractive for bond
and an improvement in the Outlook for corporate
earnings as a result of spending more households.
Thobin q theory describes the mechanism of
monetary policy in a manner affecting the economy
through its impact on equity valuations. (Asif Idres
et al, 2005)
According to Edward and Khan (1985) there are
two types of factors that determine the value of the
interest rate i.e. the internal and external factors.
Internal factors include the national income, the
amount of money in circulation, and inflation. While
the external factor is the foreign interest rate and the
rate of foreign currency exchange rate changes are
expected. (Neny Erawati,2002:99)
The mechanism works BI Rate until affect
inflation is often referred to as the transmission
mechanism of monetary policy. The mechanism
describing the actions of Bank Indonesia through the
vicissitudes of monetary instruments and operational
targets affecting various economic and financial
variables before ultimately influential to the end goal
of inflation. (Bank Indonesia, 2015).
3 RESEARCH METHOD
This study uses secondary data runtun time (time
series) in the form of a monthly period January
2011-December 2017. This research was conducted
to look at variables-variables that affect the
transmission of conventional monetary policy and
asset prices through Sharia. Variables-variables that
will be scrutinized is the SBI, SBIS, money supply,
bonds, Islamic bonds (Sukuk) in Indonesia. Data
obtained from Bank Indonesia (BI) and the financial
services authority (OJK).
The estimation model used in this study is the
analysis of dynamic model with the regression that
is by using the model of error correction (Error
Correction Model/ECM) Domowitz and granger. In
the context of Economics, dynamic model
specification is very important because it deals with
UNICEES 2018 - Unimed International Conference on Economics Education and Social Science