The Effectiveness of the Macroprudential and Monetary Policies in Indonesia: Financial Stability and Price Stability Approach

Abstract

Policy mix by Bank Indonesia to promote sustainable economic growth not only through monetary policy in stabilizing prices but also necessary for the stabilization of the financial system through the implementation of macroprudential policies in the financial system. The purpose of this study can contribute to the development of the conceptual framework of monetary and macroprudential policy mix as well as provide an alternative transmission is effective in achieving the main objective of Bank Indonesia. The data used in this study are monthly data in 2007M1 to 2016M9. The variables used were the nominal exchange rate, inflation, credit, real GDP, asset prices and Index Financial Stability (ISSK). Instruments used as macroprudential policy mix is monetary BI rate and GWM primary, GWM secondary, GWM Valas, GWM+LDR, LTV, and CCB. The analytical tool used in this research is Structural Vector Autoregression (SVAR) to see the influence of variables through the restriction as well as instruments that have an effective influence. Results showed that the interest rate of Bank Indonesia accompanied by GWM primary, GWM secondary, GWM Valas, GWM+LDR, LTV, and CCB influential in price stabilization through credit and economic growth. While the stabilization of the financial system, interest rate instruments, secondary statutory reserves and statutory reserves Currency effect through lines of credit, asset prices and exchange rates.