THE EFFECTIVENESS OF MACROPRUDENTIAL POLICIES IN MITIGATING THE SYSTEMIC RISK IN INDONESIA

Macroprudential MLB CCyB Systemic Risk.

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December 30, 2021

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Abstract

This study aims to investigate the effectiveness of macroprudential policies in mitigating the systemic risk in Indonesia. The study uses quantitative descriptive analysis with the Vector Error Correction Model (VECM) and emphasizes on the impact of two macroprudential instruments applied in Indonesia; Macroprudential Liquidity Buffer (MLB) and Countercyclical Capital Buffer (CCyB) to credit growth for conventional and financing growth for Sharia bank. This study employes monthly data over the periods M12010-M102019 that obtained from Bank Indonesia’s (BI) website (www.bi.go.di) and the data published monthly by Financial Service Authority (OJK); Indonesia Bank Statistic and Sharia Bank Statistic.

The result indicates that MLB has a positive impact on credit growth and negative effect financing for Sharia Bank. Otherwise, CCyB shows the opposite results, where it has a negative effect on credit growth, while in the Sharia bank, CCyB has a positive effect. Therefore, it is sufficient to conclude that MLB has a capability to curb the systemic risk for Sharia bank, whereas CCyB is effective for conventional bank.