Macroprudential Policy, Financial Crisis, and Macroeconomic Policy (Case Study In 5 Asean Countries)

Abstract

This study will examine two aspects, the first is the impact of macroprudential policy on the potential for a financial crisis, then the link between macroprudential policy and macroeconomic policy (monetary policy, exchange rate regime and capital control). This research will involve 5 (five) ASEAN countries as samples, namely Indonesia, Malaysia, Thailand, Vietnam and Singapore. The data used are annual data starting from 2004 to 2020. The variable used in this study is the loan-to-value (LTV) variable as a variable that describes macroprudential policy, then GDP growth rate, income per capita, inflation rate (consumer price). index), and changes in monetary policy (real interest rate). The analytical tool used in this research is the probit model. The results showed that macroprudential policies had an effect on controlling the financial crisis. Macroprudential policy is considered effective in avoiding a banking crisis by suppressing credit growth. In other words, it is found that a tightening of the LTV ratio is significantly associated with a lower probability of a banking crisis

Keywords: macroprudential policy, monetary policy, exchange rate regime and capital control.

DOI: 10.7176/JESD/13-7-08

Publication date: April 30^th 2022