IDEAS home Printed from https://ideas.repec.org/a/eee/asieco/v96y2025ics1049007824001581.html
   My bibliography  Save this article

The effect of monetary, macroprudential policy, and their interaction on bank risk-taking in Indonesia

Author

Listed:
  • Wonida, Hero
  • Setiastuti, Sekar Utami

Abstract

We employ quarterly bank-level data from 79 conventional commercial banks in Indonesia from 2009Q1 to 2021Q3 to investigate the effect of monetary policy, macroprudential policy, and the interaction of both policies on bank risk-taking in Indonesia. Several important results emerge. First, we find evidence of the risk-taking channel of monetary policy in Indonesia. Furthermore, banks with larger sizes and higher capital levels have a lower risk-taking tendency, represented by the Z-score. Second, macroprudential tightening lowers bank risk-taking. We also find that the interaction between macroprudential and monetary policy tightening reduces risk-taking. To ensure that the results are robust, we estimate our model using different measures of Z-score.

Suggested Citation

  • Wonida, Hero & Setiastuti, Sekar Utami, 2025. "The effect of monetary, macroprudential policy, and their interaction on bank risk-taking in Indonesia," Journal of Asian Economics, Elsevier, vol. 96(C).
    • Handle: RePEc:eee:asieco:v:96:y:2025:i:c:s1049007824001581
    DOI: 10.1016/j.asieco.2024.101863
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1049007824001581
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.asieco.2024.101863?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Monetary policy; Macroprudential policy; Bank risk-taking;
    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
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:asieco:v:96:y:2025:i:c:s1049007824001581. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/asieco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.