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The Effectiveness Of Trilemma Policy Choice In The Presence Of Macroprudential Policies: Evidence From Emerging Economies

Author

Listed:
  • SOLIKIN M. JUHRO

    (Bank Indonesia Institute, Bank Indonesia, Jakarta, Indonesia)

  • K. P. PRABHEESH

    (��Indian Institute of Technology Hyderabad, Hyderabad, India)

  • ALEXANDER LUBIS

    (��Economic and Monetary Policy Department, Bank Indonesia, Jakarta, Indonesia)

Abstract

This paper examines the effectiveness of the trilemma policy choice, in the presence of macroprudential policies in 10 emerging market economies. We address this issue due to the extensive use of macroprudential policies to maintain financial stability in the aftermath of global financial crisis. Our overall findings suggest that adoption of macroprudential policies with monetary policy helps to maintain macroeconomic stability in 6 out of 10 cases, and with capital account openness being effective only in three cases. Our findings suggest that the emerging economies’ policymakers can optimize the effectiveness of trilemma policy choice by giving more weightage to macroprudential policies along with exchange rate stability and monetary policy.

Suggested Citation

  • Solikin M. Juhro & K. P. Prabheesh & Alexander Lubis, 2024. "The Effectiveness Of Trilemma Policy Choice In The Presence Of Macroprudential Policies: Evidence From Emerging Economies," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 69(02), pages 483-515, March.
    • Handle: RePEc:wsi:serxxx:v:69:y:2024:i:02:n:s0217590821410058
    DOI: 10.1142/S0217590821410058
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    More about this item

    Keywords

    Trilemma; macroprudential policy; monetary policy independence; policy mix;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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