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The Role of Macroprudential Policy for Financial Stability in East Asia’s Emerging Economies

Author

Listed:
  • Yung Chul Park

    (Asian Development Bank Institute (ADBI))

Abstract

This paper analyzes the role and scope of macroprudential policy in preventing financial instability in the context of East Asian economies. It analyzes the behavior of the housing market in a dynamic setting to identify some of the factors responsible for the volatility of housing markets and their susceptibility to boom-bust cycles, which it identifies as a key source of financial imbalances in these economies. It then discusses the causal nexus between price and financial stability and the roles and complementary nature of macroprudential and monetary policies in addressing aggregate risk in the financial system. The paper identifies currency and maturity mismatches, which contributed to the 1997–1998 Asian financial crisis, as ongoing concerns in these economies although the high levels of reserves in the region now act as a buffer.

Suggested Citation

  • Yung Chul Park, 2011. "The Role of Macroprudential Policy for Financial Stability in East Asia’s Emerging Economies," Governance Working Papers 23252, East Asian Bureau of Economic Research.
    • Handle: RePEc:eab:govern:23252
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    File URL: http://www.eaber.org/node/23252
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    Citations

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    Cited by:

    1. Yung Chul Park & Shinji Takagi, 2012. "Managing Capital Flows in an Economic Community: The Case of ASEAN Capital Account Liberalization," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 8(3), pages 299-320, August.
    2. Park, Yung Chul & Wyplosz, Charles, 2012. "International Monetary Reform: A Critical Appraisal of Some Proposals," ADBI Working Papers 364, Asian Development Bank Institute.
    3. Norring, Anni, 2022. "Taming the tides of capital: Review of capital controls and macroprudential policy in emerging economies," BoF Economics Review 1/2022, Bank of Finland.
    4. Asian Development Bank Institute, 2015. "Asian Development Outlook 2015 Financing Asia’s Future Growth," Working Papers id:6666, eSocialSciences.
    5. Bhattacharyay, Biswa Nath, 2013. "Determinants of bond market development in Asia," Journal of Asian Economics, Elsevier, vol. 24(C), pages 124-137.
    6. Domanski, Dietrich & Turner, Philip, 2011. "The Great Liquidity Freeze: What Does It Mean for International Banking?," ADBI Working Papers 291, Asian Development Bank Institute.
    7. I. Made Suidarma & Yulia Indrawati & I. Gusti Nengah Darma Diatmika & I. Nyoman Anggaradana, 2017. "Financial System Vulnerability Indicators in Indonesia," International Journal of Economics and Financial Issues, Econjournals, vol. 7(5), pages 299-306.
    8. Martín Tobal, 2014. "Prudential Regulation, Currency Mismatches and Exchange Rate Regimes in Latin America and the Caribbean," Documentos de Investigación - Research Papers 17, CEMLA.
    9. Michael Chui & Emese Kuruc & Philip Turner, 2016. "A new dimension to currency mismatches in the emerging markets - non-financial companies," BIS Working Papers 550, Bank for International Settlements.
    10. Tobal Martín, 2017. "Prudential Regulation, Currency Mismatches and Exchange Rates in Latin America and the Caribbean," Working Papers 2017-21, Banco de México.
    11. Maurice Obstfeld, 2014. "Never Say Never: Commentary on a Policymaker’s Reflections," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 62(4), pages 656-693, November.

    More about this item

    Keywords

    Macroprudential Policy; Financial Stability; East Asia; Emerging Markets; monetary policy;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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