Effectiveness of Macroprudential Policies and Their Interaction with Monetary Policy in Indonesia

Indonesia has been using macroprudential policy instruments since 2011. Currently, there are four macroprudential instruments in Indonesia, namely, the maximum loanto-value (LTV) ratio, the countercyclical capital buffer (CCB), the macroprudential intermediation ratio (MIR) and the macroprudential liquidity buffer (MPLB). However, this study is limited to examining the impact of the MIR and LTV ratio only. We do not take the CCB and MPLB into account for several reasons. First, the CCB is still being implemented with 0% charge of capital, hence we have not yet observed its impact on the banking system. Second, the MPLB was introduced only recently (in 2018), and thus the historical implementation data is insufficient for this research. A detailed explanation of the MIR and LTV ratio, their design, purpose and formula, and their historical reformulation is given in the following subsections. Full Publication: "https://ssrn.com/abstract=3550125" Measuring the Effectiveness of Macroprudential Policies Using Supervisory Bank-Level Data