Financial Vulnerability, Capital Flow Reversals, And Divergence Macro-Prudential Policies Posing Challenges To The ASEAN Banking Integration Framework (ABIF)

by Assoc. Prof. Dr. Mohd Yaziz Mohd Isa, Dr. Yap Voon Choong, David Yong Gunn Fie and Prof. Datuk Seri Dr. Md. Zabid Haji Abdul Rashid.

 Journal of Modern Accounting and Auditing, (2016) Vol. 12, No.5

Abstract

Against the prevailing background of an unusual capital flow reversal which is posing immense challenges to the integration of the region’s banking sector, this study measures macro-prudential instruments affecting the implementation of an integrated financial service industry.

This study is important at times when domestic and country-based financial policies are directed at competing goals. The interaction of macro-prudential policies with other policies, in particular monetary policies and micro-prudential policies is crucial to address systemic risk involved. There is growing recognition that prudential policies tools interact and coordinate with one another.

To utilize multiple instruments seems to provide a greater assurance of effectiveness by tackling risk from various angles. As such, this study also assesses the interactions of the policies. The study also proposes a baseline model to capture systemic risk due to liquidity risk and risk because of currency devaluation.

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