Did the policy responses influence credit and business cycle co-movement during the COVID-19 crisis? Evidence from Indonesia

Prabheesh, K P (2023) Did the policy responses influence credit and business cycle co-movement during the COVID-19 crisis? Evidence from Indonesia. Economic Analysis and Policy, 78. pp. 243-255. ISSN 0313-5926

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Abstract

This paper examines the responses of credit and business cycle to various policy actions of the Government of Indonesia during the COVID-19 crisis. Specifically, the paper addresses two key questions (1) How do the credit and business cycle behave during the COVID-19 crisis in Indonesia? (2) Do the central bank and government policy responses effectively stabilize the credit and business cycle? Using the concordance Index and DCC-GARCH methodology, we found that the COVID-19 crisis increased Indonesia's credit and business cycle co-movements. Similarly, using the mixed data sampling regression technique, our findings suggest fiscal policy measures and government support help the business cycle revival during the COVID-19 pandemic. However, the monetary policy transmission is weak during the pandemic

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