The Influence of Macroprudential Policies on The Dynamics of Financial Stability In Indonesia: A Sur Model-Based Study

Abstract

Financial stability and economic growth are two important aspects that are interrelated in a country's economy. Macroprudential policies play an important role in maintaining this balance, especially with various instruments including regulation of interest rates, control of M2, namely the amount of money in circulation, to the ratio of non-performing loans. In Indonesia, the implementation of macroprudential policies continues to be strengthened to face global challenges and maintain the stability of the financial system. However, the impact of these policies on economic growth and inflation requires further study to determine their effectiveness in supporting the national economy. The final results of the study are expected to be able to analyze the influence of macroprudential policies on financial stability and economic growth in Indonesia using the approachSeemingly Unrelated Regression(SUR) during the period 2017-2023. The independent variables studied include Interest Rate Level, Money Supply (M2), Minimum Reserve Loan Fund Ratio (GWM LFR), Non-Performing Loan (NPL), and Inflation, with dependent variables of Economic Growth (GDP) and Inflation. EstimatesOutputThe data processed through Eviews 10 shows that the Interest Rate Level (TSB) and Inflation have a negative and significant effect on GDP, while NPL has a significant positive effect. In addition, in the second model, the Interest Rate Level has a positive effect on Inflation, while M2 has a negative effect. Other variables such as GWM LFR and NPL do not have a significant effect on inflation. The R-squared value in both models shows the high ability of the model to explain the variation of the dependent variable. This finding indicates that macroprudential policies in Indonesia, especially in terms of managing interest rates, inflation, and NPLs, play an important role in supporting economic stability. Therefore, a more balanced interest rate policy is needed as well as optimization of liquidity management and NPL supervision to maintain sustainable economic growth and financial system stability, especially in Indonesia.