Macroprudential Policy in Asian Economies

31 Pages Posted: 4 May 2020

Date Written: April 16, 2019

Abstract

This paper analyzes the conduct and effects of macroprudential policy in 11 Asian economies. Of these, India, the People’s Republic of China, and the Republic of Korea frequently used loan-to-value ratios and required reserve ratios even before the global financial crisis. India and the People’s Republic of China are the most frequent users of macroprudential policy tools. Since 2000, tightening actions have been more frequent than loosening in the 11 economies. Most took tightening actions more frequently after the global financial crisis than before it. In most of these economies, macroprudential policy tends to be tightened when credit expands. The main empirical results from the analysis, which uses panel vector autoregression models, are that contractionary macroprudential policy has significant negative effects on credit and output; and that these effects are qualitatively similar to those of monetary policy. This suggests that policy authorities may experience potential policy conflicts when credit conditions are excessive and the economy is in recession.

Keywords: credit, macroprudential policy, monetary policy, output, vector autoregression

JEL Classification: E58, E60, G28

Suggested Citation

Kim, Soyoung, Macroprudential Policy in Asian Economies (April 16, 2019). Asian Development Bank Economics Working Paper Series No. 577, Available at SSRN: https://ssrn.com/abstract=3590133 or http://dx.doi.org/10.2139/ssrn.3590133

Soyoung Kim (Contact Author)

Seoul National University ( email )

Kwanak-gu
Seoul, 151-742
Korea, Republic of (South Korea)
+82-2-880- 2689 (Phone)

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