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Did the policy responses influence credit and business cycle co-movement during the COVID-19 crisis? Evidence from Indonesia

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  • Prabheesh, K.P.
  • Sasongko, Aryo
  • Indawan, Fiskara

Abstract

This paper examines the responses of credit and business cycle to various policy actions of the Government of Indonesia during the COVID-19 crisis. Specifically, the paper addresses two key questions (1) How do the credit and business cycle behave during the COVID-19 crisis in Indonesia? (2) Do the central bank and government policy responses effectively stabilize the credit and business cycle? Using the concordance Index and DCC-GARCH methodology, we found that the COVID-19 crisis increased Indonesia’s credit and business cycle co-movements. Similarly, using the mixed data sampling regression technique, our findings suggest fiscal policy measures and government support help the business cycle revival during the COVID-19 pandemic. However, the monetary policy transmission is weak during the pandemic

Suggested Citation

  • Prabheesh, K.P. & Sasongko, Aryo & Indawan, Fiskara, 2023. "Did the policy responses influence credit and business cycle co-movement during the COVID-19 crisis? Evidence from Indonesia," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 243-255.
    • Handle: RePEc:eee:ecanpo:v:78:y:2023:i:c:p:243-255
    DOI: 10.1016/j.eap.2023.02.007
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