Assessing the Effects of Macroprudential Policy on the Indian Macroeconomy

Sanjiv Kumar and K.P. Prabheesh

Emerging Markets Finance and Trade, 2024, vol. 60, issue 6, 1182-1208

Abstract: This study examines the impact of macroprudential policy (MaPP) on macroeconomic conditions. Using data from 2004–2005 to 2019–2020, this study finds that increased use of MaPP is associated with higher consumption and economic growth. However, this study does not find a significant effect on inflation. From a threshold perspective, the study reveals that MaPP has a positive impact on consumption and economic growth up to a threshold level of 34.00; however, above this level, MaPP has a negative impact on both variables. Similarly, MaPP has a positive impact on inflation rates below the threshold level but has a negative impact above it. From a tail risk perspective, MaPP has a positive impact on the bottom quantile of economic growth.

Date: 2024
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DOI: 10.1080/1540496X.2023.2278643

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