DRN Vol. 39 No.3
'Reexamine SHS Programs Employment and Entrepreneurial Objectives'
Regulatory Impact Assessment Adoption Determinants: A Diagnostic Framework
Exploring Responses to the Employment Impact of Excise Tax Reform: The Case of the Philippine Tobacco Industry
Mapping Out Employment Opportunities in the Cultural Heritage Sector A Strategic Framework

PIDS WB 2021-0905
Annual Public Policy Conference Webinar 4: Robust and Healthy Workforce and Closing Program
PIDS WB 2021-0904
Annual Public Policy Conference Webinar 3: Green And Inclusive Recovery
PIDS WB 2021-0903
Annual Public Policy Conference Webinar 2: Ethical Business
PIDS WB 2021-0902
Opening Program and Annual Public Policy Conference Webinar 1: Resetting Capitalism
Publication Detail
BRAc DP 2021-02: Financial Cycles and Credit Regimes in Five ASEAN Economies

Estimates of the duration of financial cycles can be a monitoring tool for policymakers so that they can have a better appreciation of when risks to financial stability increase, remain stable, or decrease. We use three indicators to estimate the financial cycle for the Philippines—the growth in Credit-to-GDP ratio, the growth in the level of Credit to the Private Sector, and the Debt Service Ratio. We extend this analysis to four (4) other ASEAN economies, namely Indonesia, Malaysia, Thailand, and Singapore and examine the period 1985 up to 2020, thus covering the COVID-19 pandemic. We posit that during the pandemic period, there was a downward trend in both the business cycle and the financial cycle in the region. Estimates using the Corbae-Oulliaris filter and the Credit-to-GDP indicator for the ASEAN-5 economies show that for three countries: the Philippines, Malaysia, and Indonesia, there is indeed a convergence in the downtrend for both the business and financial cycles. Meanwhile, using both Threshold structural vector autoregression (SVAR) and Markov-Type regime-switching techniques, we also establish that there are two distinct regimes in the region: a high-credit regime and a low- or normal- credit regime. Nonetheless, extending the estimation to Q4 2020 did not indicate a new switch for 2020 as yet, despite pandemic conditions. Finally, Threshold SVAR estimation as in Balke (2000) indicated that indeed, shocks to monetary policy and inflation would have a different impact on output depending on what credit regime the economy is in. During high credit regimes, monetary policy changes have a perverse impact on real output growth, and shocks to credit have a larger countercyclical impact on output. This could mean that monetary policy changes alone are not enough in containing overheating credit conditions, implying the need for macroprudential and other central bank policies.

Bangko Sentral ng Pilipinas
Authors Keywords
Fermo, Laura, B.; ASEAN; monetary policy; credit; financial cycles; credit regimes; thresholds; threshold regression; Markov; regime-switching ;
Download PDF Number of Downloads
Published in 2021 and available for Downloaded 1 times since August 02, 2021
Please let us know your reason for downloading this publication. May we also ask you to provide additional information that will help us serve you better? Rest assured that your answers will not be shared with any outside parties. It will take you only two minutes to complete the survey. Thank you.

To use as reference:
If others, (Please specify):
Name: (optional)
Email: (required, but will not display)
If Prefer to self-describe, please specify:
Level of Education:
If employed either part-time or full-time, name of office:
If others, (Please specify):
Would you like to receive the SERP-P UPDATES e-newsletter? Yes No
Use the space below if you have any comment about this publication or SERP-P knowledge resources in general.