THE EFFECTIVENESS OF TRILEMMA POLICY CHOICE IN THE PRESENCE OF MACROPRUDENTIAL POLICIES: EVIDENCE FROM EMERGING ECONOMIES

Solikin Juhro, K. P. Prabheesh and Alexander Lubis
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K. P. Prabheesh: ��Indian Institute of Technology Hyderabad, Hyderabad, India
Alexander Lubis: ��Economic and Monetary Policy Department, Bank Indonesia, Jakarta, Indonesia

The Singapore Economic Review (SER), 2024, vol. 69, issue 02, 483-515

Abstract: This paper examines the effectiveness of the trilemma policy choice, in the presence of macroprudential policies in 10 emerging market economies. We address this issue due to the extensive use of macroprudential policies to maintain financial stability in the aftermath of global financial crisis. Our overall findings suggest that adoption of macroprudential policies with monetary policy helps to maintain macroeconomic stability in 6 out of 10 cases, and with capital account openness being effective only in three cases. Our findings suggest that the emerging economies’ policymakers can optimize the effectiveness of trilemma policy choice by giving more weightage to macroprudential policies along with exchange rate stability and monetary policy.

Keywords: Trilemma; macroprudential policy; monetary policy independence; policy mix (search for similar items in EconPapers)
JEL-codes: E32 F33 F41 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1142/S0217590821410058

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