The Impact of Central Bank Policy Mix on Banking Risk Behavior
Abstract
Research Originality: The study investigates the impact of a coordinated policy mix on Banking Risk Behavior in creating credit.
Research Objectives: This research aims to determine the effect of the policy mix on lending and the role of risk behavior in Indonesia.
Research Methods: We use the Structural Vector Autoregression (SVAR) estimation technique for data 2012Q1-2021Q3.
Empirical Results: The study found that monetary policy does not affect credit directly through credit interest rates. Monetary policy affects credit indirectly through its ability to influence an internal variable of banks and strengthen it through interaction with macroprudential policies. The study found that deposit and capital determine the amount of credit disbursed. The study results found that the policy mix of monetary and macroprudential policies effectively influenced recognition in Indonesia. Mixed policies reinforce one another.
Implications: To manage bank risk behavior in distributing credit, a mix of monetary and macroprudential policies is needed. When coordinated, both policies reinforce each other and are more effective than when done separately.
JEL Classification: E52, E580, E510
How to Cite:
Wijaya, M. B. L., Wibisana, G. A. & Utama, C. (2025). The Impact of Central Bank Policy Mix on Banking Risk Behavior. Signifikan: Jurnal Ilmu Ekonomi, 14(1), 1-16. https://doi.org/10.15408/sjie.v14i1.41334
Keywords
References
Aiyar, S., Calomiris, C. W., & Wieladek, T. (2016). How Does Credit Supply Respond to Monetary Policy and Bank. Bank for International Settlement (BIS), 1-51. https://doi.org/10.1016/j.euroecorev.2015.07.021.
Amalia, S. Q., & Suriani, S. (2023). Do Interest Rate Policy and Liquidity Affect Banking Credit Risk in Indonesia?. Signifikan: Jurnal Ilmu Ekonomi, 12(1), 145-160. https://doi.org/10.15408/sjie.v12i1.27119.
Aydinbas, Y., Hardt, C., Rzayev, J., Soker, M., Taylor, T., Walker, D., & Zhao, P. (2015). Conceptual Foundations of Macroprudential Policy. New York: The Federal Reserve Bank.
Bikker, J. A., & Vervliet, T. M. (2018). Bank Profitability and Risk‐Taking under Low Interest Rates. International Journal of Finance & Economics, 23(1), 3-18.
Borio, C., & Zhu, H. (2008). Capital Regulation, Risk-Taking and Monetary Policy: A Missing Link in the Transmission Mechanism? Bank for International Settlement, 1-39. https://doi.org/10.1016/j.jfs.2011.12.003.
Chen, J., & Columba, F. (2016). Macroprudential and Monetary Policy Interactions in a DSGE Model for Sweden. IMF Working Paper 16/74, 5-58.
Dajcman, S. (2017). Bank Risk Aversion and The Risk-Taking Channel of Monetary Policy in the Euro Area. Panoeconomicus, 64(5), 607-621. https://doi.org/10.2298/PAN150601016D.
De Schryder, S., & Opitz, F. (2021). Macroprudential Policy and Its Impact on the Credit Cycle. Journal of Financial Stability, 53, 100818. https://doi.org/10.1016/j.jfs.2020.100818.
Freixas, X., & Rochet, J.-C. (2008). Microeconomics of Banking (2nd ed.). London: MIT Press.
Hidayati, N., & Sugiyanto, F. (2019). Analisis Dampak Bauran Kebijakan Moneter dan Makroprudensial Terhadap Stabilitas Harga dan Stabilitas Sistem Keuangan di Indonesia. Jurnal Dinamika Ekonomi Pembangunan, 2(3), 31-52.
Hussain, M., Bashir, U., & Bilal, A. R. (2021). Effect of Monetary Policy on Bank Risk: Does Market Structure Matter? International Journal of Emerging Market, 16(4), 696-725. https://doi.org/10.1108/IJOEM-09-2019-0674.
Insukindro, & Pritadrajati, D. S. (2019). The Effects of the United States Monetary Stimulus (Quantitative Easing) Towards the Indonesian Economic Fluctuations. Journal of Applied Economics Sciences, 14(2), 440-453. https://doi.org/10.14505/jaes.v14.2(64).14.
Jeong, S., & Jung, H. (2013). Bank Wholesale Funding and Credit Procyclicality: Evidence from Korea. Panoeconomicus, 60(5), 615-631. https://doi.org/10.2298/PAN1305615J.
Jimenez, G., & Saurina, J. (2006). Credit Cycles, Credit Risk, and Prudential Regulation. International Journal of Central Banking, 2(2), 65-98.
Jung, Y. (2015). Macroprudential and Monetary Policies: Implications for House Prices and Household Debt. Seoul Journal of Economics, 28(2), 143-169.
Kasri, R. A., & Azzahra, C. (2020). Determinants of Bank Stability in Indonesia. Signifikan: Jurnal Ilmu Ekonomi, 9(2), 153-166. doi: http://doi.org/10.15408/sjie.v9i2.15598.
Kim, S., & Mehrotra, A. (2022). Examining Macroprudential Policy and Its Macroeconomic Effects–Some New Evidence. Journal of International Money and Finance, 128, 102697. https://doi.org/10.1016/j.jimonfin.2022.102697.
Lim, C. H., Krznar, I., Lipinsky, F., Otani, A., & Wu, X. (2013). The Macroprudential Framework: Policy Responsiveness and Institutional Arrangements. IMF Working Paper No. 2013/166, 2-39.
Lütkepohl, H., & Krätzig, M. (2004). Applied Time Series Econometrics. London: Cambridge University Press.
Malovaná, S., Hodula, M., Gric, Z., & Bajzík, J. (2023). Macroprudential Policy in Central Banks: Integrated or Separate? Survey Among Academics and Central Bankers. Journal of Financial Stability, 65, 101107. https://doi.org/10.1016/j.jfs.2023.101107.
Matthew, K., & Thompson, J. (2008). Risk Management. Chichester: John Wiley & Son.
Matysek-Jedrych, A. (2018). Institutional Arrangement for Macroproprudential Policy - On Differences Across the EU Countries. Comparative Economic Research, 21(2), 37-50.
Mishkin, F. S. (2009). Globalization, Macroeconomic Performance, and Monetary Policy. Journal of Money, Credit and Banking, 41(1), 187-195. https://doi.org/10.1111/j.1538-4616.2008.00204.x.
Paligorova, T., & Jimenez, J. S. (2012). Monetary Policy and The Risk-Taking Channel: Insights from The Lending Behaviour of Banks. Bank of Canada Review, 23-30.
Pan, H., & Zhang, D. (2020). Coordination Effects and Optimal Policy Choices of Macroprudential Policy and Monetary Policy. Complexity, 2020, 9798063. doi:https://doi.org/10.1155/2020/9798063.
Rajan, R. G. (2005). Has Financial Development Made the World Riskier? National Bureau of Economic Research No. 11728, 1-42.
Robstad, O. (2018). House Prices, Credit and the Effect of Monetary Policy in Norway: Evidence from Structural VAR Models. Empirical Economics, 54, 461-483. https://doi.org/10.1007/s00181-016-1222-1.
Saini, S., Ahmad, W., & Bekiros, S. (2021). Understanding the Credit Cycle and Business Cycle Dynamics in India. International Review of Economics & Finance, 76, 988-1006. https://doi.org/10.1016/j.iref.2021.08.006.
Shala, A., Livoreka, B., Berisha, V., & Merovci, S. (2013). The Current Global Financial Crisis 2008-2012. Acta Universitatis Danubius. Œconomica, 9(6), 106-125.
Sui, J., Liu, B., Li, Z., & Zhang, C. (2022). Monetary and Macroprudential Policies, Output, Prices, and Financial Stability. International Review of Economics & Finance, 78, 212-233. https://doi.org/10.1016/j.iref.2021.11.010.
Taylor, J. B. (2009). The Financial Crisis and the Policy Responses: An Empirical Analysis of What Went Wrong. National Bureau of Economic Research No. 14631, 341-364.
Triandhari, R., Safuan, S., Syamsudin, M., & Alamsyah, H. (2017). Optimal Monetary and Macroprudential Policies Under Risk Taking Environment. European Research Studies Journal, XX(4B), 211-226.
Utama, C., Insukindro, I., & Fitrady, A. (2022). Fiscal and Monetary Policy Interactions in Indonesia during Periods of Economic Turmoil in the Us: 2001q1-2014q4. Buletin Ekonomi Moneter dan Perbankan, 25(1), 97-126. https://doi.org/10.21098/bemp.v25i1.1619.
Yi, X., Liu, S., & Wu, Z. (2022). What Drives Credit Expansion Worldwide? An Empirical Investigation with Long-Term Cross-Country Panel Data. International Review of Economics & Finance, 80, 225-242. https://doi.org/10.1016/j.iref.2022.02.066.
DOI: 10.15408/sjie.v14i1.41334
Refbacks
- There are currently no refbacks.
