Comparison Effectiveness of Conventional and Islamic Monetary Policiesto Controlling Inflation in Indonesia Period 2012-2018

This study aims to know the extent influence and effectiveness of conventional monetary policy that reflected by the interest rates of Bank Indonesia Certificates (SBI), total loans of conventional bank (LOAN) and the average Government Bonds yield (SUN) and Islamic monetary policy that reflected by the rates of return on Bank Indonesia Sharia Certificates (SBIS), total financing of Islamic bank (FINC) and the average Islamic Government Bonds yield (SBSN) to controlling inflation Indonesia in 2012-2018. The analysis method used in this study is Vector Error Correction Model (VECM). The VECM results show that in the short term only SBSN has a significant effect on inflation, but that efect is positive (increasing inflation). In addition in the long term, SBI has a significant negative effect while FINC, SUN and SBSN have a significant positive effect. The effectiveness which is measured by Impulse Response Function (IRF) and Forecast Error Variance Decomposition (FEVD) shows that conventional monetary policy is Faster in stabilizing inflation but the scope is small, while Islamic monetary policy is slower in stabilizing inflation but the scope is bigger.     Keywords: Inflation, Dual Monetary Policy, Interest Rate Channel, Loans Channel, Asset Price Channe