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Effectiveness of Macroprudential Policies in Developing Asia: An Empirical Analysis

Author

Listed:
  • Lee, Minsoo

    (Asian Development Bank)

  • Asuncion, Ruben Carlo

    (Asian Development Bank)

  • Kim, Jungsuk

    (Sogang University)

Abstract

The global financial crisis highlighted the need for national bank supervisory authorities to improve surveillance systems and to detect early on the buildup of macroeconomic risks that could threaten the entire financial system. This paper presents an empirical framework for analyzing how effective macroprudential policies control credit growth, leverage growth, and housing price appreciation. Two significant findings emerge. Broadly, macroprudential policies can indeed promote financial stability in Asia. More specifically, different types of macroprudential policies are more effective against different types of macroeconomic risks.

Suggested Citation

  • Lee, Minsoo & Asuncion, Ruben Carlo & Kim, Jungsuk, 2015. "Effectiveness of Macroprudential Policies in Developing Asia: An Empirical Analysis," ADB Economics Working Paper Series 439, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0439
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    Cited by:

    1. Tsoy Lyubov & Almas Heshmati, 2023. "Impact Of Financial Crises On The Dynamics Of Capital Structure: Evidence From Korean Listed Companies," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 68(03), pages 867-898, June.
    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. Luangaram, Pongsak & Thepmongkol, Athakrit, 2022. "Loan-to-value policy in a bubble-creation economy," Journal of Asian Economics, Elsevier, vol. 79(C).
    4. Khwazi Magubane & Ntokozo Patrick Nzimande, 2024. "A Structural Vector Autoregression Exploration of South Africa’s Monetary and Macroprudential Policy Interactions," Economies, MDPI, vol. 12(10), pages 1-32, October.
    5. Marcin Czaplicki, 2022. "Measuring the restrictiveness of (macro)prudential policy: the case of bank capital regulation in Poland," Journal of Banking Regulation, Palgrave Macmillan, vol. 23(3), pages 322-338, September.
    6. Murat AKÇA & Vedat KAYA, 2023. "Effectiveness of Unconventional Monetary Policy Tools on Financial Stability: A NARDL Approach for Turkey," Bingol University Journal of Economics and Administrative Sciences, Bingol University, Faculty of Economics and Administrative Sciences, vol. 7(1), pages 63-80, June.
    7. Khan, Fahad & Ramayandi, Arief & Schröder, Marcel, 2020. "Conditions for Effective Macroprudential Policy Interventions," ADB Economics Working Paper Series 609, Asian Development Bank.
    8. Kim, Kyungmin & Lee, Joo Yong, 2017. "Estimating the effects of FX-related macroprudential policies in Korea," International Review of Economics & Finance, Elsevier, vol. 50(C), pages 23-48.
    9. Yıldırım-Karaman, Secil, 2017. "Uncertainty shocks, central bank characteristics and business cycles," Economic Systems, Elsevier, vol. 41(3), pages 379-388.
    10. Saha, Asish & Rooj, Debasis & Sengupta, Reshmi, 2023. "Macroprudential Policy and mortgage leverage decisions—Evidence from micro data," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1430-1444.
    11. repec:idn:jimfjn:v:4:y:2018:i:1b:p:1-16 is not listed on IDEAS
    12. Tae Soo Kang & Hyunduk Suh, 2017. "Asset-based Reserve Requirements in a Dynamic Stochastic General Equilibrium Model," Asian Economic Papers, MIT Press, vol. 16(2), pages 216-242, Summer.
    13. Salim M. Darbar & Xiaoyong Wu, 2016. "Experiences with Macroprudential Policy — Five Case Studies," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 7(03), pages 1-34, October.
    14. Aditya Anta Taruna & Cicilia Anggadewi Harun & Raquela Renanda Nattan, 2020. "Macroprudential Liquidity Stress Test: An Application to Indonesian Banks," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 9(special i), pages 165-187.
    15. Qureshi, Fiza & Kutan, Ali M. & Ismail, Izlin & Gee, Chan Sok, 2017. "Mutual funds and stock market volatility: An empirical analysis of Asian emerging markets," Emerging Markets Review, Elsevier, vol. 31(C), pages 176-192.
    16. Muhamed Zulkhibri & Muhammad Rizky Prima Sakti, 2018. "Procyclicality And Bank Lending Behavior In Indonesia: The Case Of Dual Banking System," Journal of Islamic Monetary Economics and Finance, Bank Indonesia, vol. 4(1), pages 23-38, August.
    17. Hero Wonida & Sekar Utami Setiastuti, 2023. "The Effect of Monetary Policy & Macroprudential Policy and Their Interaction on Bank Risk-Taking in Indonesia," Gadjah Mada Economics Working Paper Series 202308007, Department of Economics, Faculty of Economics and Business, Universitas Gadjah Mada.

    More about this item

    Keywords

    developing Asia; financial stability; macroprudential policy;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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