Author:
ANWAR CEP JANDI,SUHENDRA INDRA,FAHMI GINANJAR RAH ADI,PURWANDA EKA,NUR KHOLISHOH LILIS
Abstract
This study evaluated the impact of monetary policy efficiency (MPE) and financial market development (FMD) on financial stability using the credit gap as a proxy. New datasets were constructed for the MPE of 63 developing economies from 1990:Q1 to 2021:Q4. The panel homogeneity assumption was verified using the Chow and Roy-Zellner tests, and the findings showed that the model was not homogenous. Thus, the pooled mean group (PMG) estimator was used. The empirical results revealed that MPE and FMD significantly impacted the credit gap. The effects of MPE and FMD on financial stability were as substitutes. Since the sample was divided into two groups: high and low-middle income nations, the conclusion was robust, and the negative connection between the variables remained. In addition, a dynamic panel estimation was also applied, which found significant effects of MPE and FMD on the credit gap.
Publisher
Universiti Putra Malaysia
Subject
Strategy and Management,General Economics, Econometrics and Finance,Business and International Management