Coordination of macro-management policies to curtail credit growth

This study analyses the most efficient macro-management policies (MMP) that effectively curb domestic credit growth in Emerging Market Economies (EMEs) when synchronized with a tighter monetary policy. We undertake a comparative analysis of how this policy coordination performs under different exchange rate regimes—floating and pegged, evaluating their effectiveness in both standard economic conditions and crises. We analyzed quarterly data from 36 EMEs from 2006 to 2022 using a model featuring fixed effects within a dynamic panel framework. Our results reveal a more effective alignment of tighter monetary policy with macroprudential regulation and credit control measures, in contrast to its coordination with liquidity requirements, fiscal policy, and capital flow management. This alignment is notably stronger under a floating exchange rate regime, while it tends to weaken with pegged exchange rates. Additionally, crisis periods highlight a disruption in the synergy between tighter monetary policy and MMP. The reliability of our findings affirmed through extensive robustness checks, offers crucial insights for policy implications to control credit growth in EMEs.