Citation:

Eka Febrianti Utami, Regina Niken Wilantari, Teguh Hadi Priyono, Sebastiana Viphindrartin, Zainuri. "The Role of Macroprudential Policy on Capital Outflow" International Research Journal of Economics and Management Studies, Vol. 3, No. 1, pp. 89-94, 2024.

Abstract:

The Fed's 2021 tapering policy is putting pressure on the domestic economy. Capital outflows increase, the exchange rate experiences depreciation, and the potential opportunity for a decline in foreign exchange reserves is at significant risk. However, with the implementation of the Fed's tapering policy in 2022, the potential for a decrease in foreign exchange reserves will be replaced by the increasing role of the monetary authority's concern for banking liquidity. Meanwhile, capital outflows can increase more sharply after the new average period and the accelerated recovery of the United States economy in 2022. Various macroeconomic policies have been implemented to reduce pressure on capital outflows, especially in financial markets, which are known to be sensitive compared to other markets. In addition, economic market conditions, which are influenced by procyclicals, provide a strategic role for macroprudential policy as an appropriate macroeconomic policy. Using an annual data sample from 2013 – 2022, the VECM results show that the countercyclical capital buffer, macroprudential intermediation ratio, and macroprudential liquidity buffer do not have a direct effect on capital outflow but act as a cushioning policy. Increasing the role of quasi-debt management or non-conventional monetary policy is recommended.

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Keywords:

Capital outflow, Macroprudential Policy, New Normal, Procyclical, Tapering.