The credit market management through the macroprudential policy and other selected Macroeconomic variables in Indonesia

Iqbal Fahmia

Abstract

Management is the process of dealing with or controlling things, system or people. Many use this term in business and organizational perspectives. However, management is also applicable in economic perspective. In the existing study, the focused issue relates the managemnet of an economic tool in influencing the other economic variable. In particular, the study is about managing the credit market through the macroprudential policy and other selected macroeconomic variables namely GDP, interest rates, and property prices. The study focuses on the Indonesian credit market. To achieve the general objective, the following specific objectives are set in the following order; to detect the existence of the cointegration relationship between the variables, and to examine the dynamic interaction between the focused variables both in long run and short run. This study used quarterly data from Q1 2011 to Q4 20192. The data were analyzed by using Auto Regressive Distributed Lag (ARDL). The results of the ARDL’s test give indication, in the long run the credit market is significantly and negatively affected by changes in Macroprudential policies and Property Price, and significant and positive association with GDP and interest rates. The results obtained from the Error Correction Model; which captures the short-term interactions between the focused variables had detected significant results in all factors except for property price factor. The overall findings lead us to conclude; the implementation of Macroprudential policy significantly affect the Indonesian credit market. As the implication, Indonesian government may consider Macroprudential policy as an economic tool in achieving a stable credit market in the future. Keywords: Macroprudential, macroeconomics, credit, property price, interest rate

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