Proceedings of the 51st International Academic Conference, Vienna

STRENGTHENING THE ROLE OF MACROPRUDENTIAL POLICIES TO SUPPORT A SUSTAINABLE DEVELOPMENT. THE CASE OF INDONESIA

MOHAMAD FADHIL HASAN, ACHMAD NUR HIDAYAT, TUTUT DEWANTO

Abstract:

The external pressures on the domestic economic stability has prompted Bank Indonesia to focus on its monetary policy on the exchange rate measures. However, as part of the policy mix, the stance of monetary policy has been balanced with accommodative macroprudential policies to continue providing its support for the economic growth. Even though they have different targets and in their implementation there are potential conflicts that may occur when we try to achieve the objectives of both policies, the central bank deems a monetary policy and macroprudential policies to be complementary policies. This situation will provide a space for the macroprudential policies to encourage some kind of bank intermediation and to spur a credit growth. A policy support is needed to accelerate the credit growth to achieve its economic financing targets in the next 5 years, namely at 16% yoy. This study was aimed at identifying proper recommendations on the macroprudential policies such as encouraging a credit growth that included easing Loan to Value (LTV) ratios, targeting sectoral credit, easing the Macroprudential Intermediation Ratio (MIR), decreasing the Macroprudential Liquidity Buffer (MLB) ratios, easing the counter cyclical capital buffer (CCB) requirements, and strengthening coordination with other government agencies.

Keywords: Macroprudential policy, monetary policy, credit growth, loan to value ratio, coordination, sustainable economic growth, targeted sectoral lending

DOI: 10.20472/IAC.2019.051.007

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