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Macroprudential Policy in Asian Economies

Author

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  • Kim, Soyoung

    (Seoul National University)

Abstract

This paper analyzes the conduct and effects of macroprudential policy in 11 Asian economies. Of these, India, the People’s Republic of China, and the Republic of Korea frequently used loan-to-value ratios and required reserve ratios even before the global financial crisis. India and the People’s Republic of China are the most frequent users of macroprudential policy tools. Since 2000, tightening actions have been more frequent than loosening in the 11 economies. Most took tightening actions more frequently after the global financial crisis than before it. In most of these economies, macroprudential policy tends to be tightened when credit expands. The main empirical results from the analysis, which uses panel vector autoregression models, are that contractionary macroprudential policy has significant negative effects on credit and output; and that these effects are qualitatively similar to those of monetary policy. This suggests that policy authorities may experience potential policy conflicts when credit conditions are excessive and the economy is in recession.

Suggested Citation

  • Kim, Soyoung, 2019. "Macroprudential Policy in Asian Economies," ADB Economics Working Paper Series 577, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0577
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    References listed on IDEAS

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    8. Claudio Borio & Mathias Drehmann, 2009. "Assessing the risk of banking crises - revisited," BIS Quarterly Review, Bank for International Settlements, March.
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    Cited by:

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    2. Marek A. Dąbrowski & Dimas Mukhlas Widiantoro, 2023. "Effectiveness and conduct of macroprudential policy in Indonesia in 2003–2020: Evidence from the structural VAR models," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 13(3), pages 703-731, December.
    3. Nakatani, Ryota, 2020. "Macroprudential policy and the probability of a banking crisis," Journal of Policy Modeling, Elsevier, vol. 42(6), pages 1169-1186.
    4. Ayşegül Ladin SÜMER, 2021. "Evaluation of the methodological relationship between real business cycle model and macroprudential policy," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(3(628), A), pages 57-64, Autumn.
    5. Kim, Soyoung & Shim, Seri & Chen, Hongyi, 2023. "Effects and Conduct of Macroprudential Policy in China," Journal of Financial Stability, Elsevier, vol. 66(C).
    6. Wong, Siu Kei & Cheung, Ka Shing & Deng, Kuang Kuang & Chau, Kwong Wing, 2021. "Policy responses to an overheated housing market: Credit tightening versus transaction taxes," Journal of Asian Economics, Elsevier, vol. 75(C).
    7. Nuwat Nookhwun & Rawipha Waiyawatjakorn, 2023. "Flexible Inflation Targeting and Macroeconomic Performance: Evidence from ASEAN," PIER Discussion Papers 208, Puey Ungphakorn Institute for Economic Research, revised Jan 2024.

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    More about this item

    Keywords

    credit; macroprudential policy; monetary policy; output; vector autoregression;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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