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Financial System Vulnerability Indicators in Indonesia

Author

Listed:
  • I. Made Suidarma

    (Department of Management, University of Pendidikan Nasional Denpasar, Indonesia)

  • Yulia Indrawati

    (Department of Economics, University of Jember, Indonesia)

  • I. Gusti Nengah Darma Diatmika

    (Department of Economics, University of Tabanan, Indonesia,)

  • I. Nyoman Anggaradana

    (Department of Accounting, University of Pendidikan Nasional Denpasar, Indonesia)

Abstract

The objective of this research is to analyze the indicators that cause vulnerability to financial system stability in Indonesia. The data used in this research is secondary data monthly with a range of 2006.1 to 2015.6. The method were used in this study Markov Switching Vector Autoregressive (MSVAR). The indicators used in this analysis are development of financial indicators, the financial vulnerability indicators, and the world economic climate indicator. The results of this study showed that overall, the indicators used as an early detection of vulnerability to financial system stability in Indonesia is showing signs of permanent especially on some variables that are the growth of credit to total GDP, interest rate spread, the fiscal deficit, current account, exchange rates and interest rate differentials. Credit to deposit ratio indicator does not allow instability in the financial system in Indonesia compared to the ratio of credit to GDP indicator. Inflation indicator showed chances of a crisis were small and not significant permanent. Indicators of capital transactions showed a smaller probability of the crisis compared to the current account.

Suggested Citation

  • I. Made Suidarma & Yulia Indrawati & I. Gusti Nengah Darma Diatmika & I. Nyoman Anggaradana, 2017. "Financial System Vulnerability Indicators in Indonesia," International Journal of Economics and Financial Issues, Econjournals, vol. 7(5), pages 299-306.
    • Handle: RePEc:eco:journ1:2017-05-36
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    References listed on IDEAS

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    More about this item

    Keywords

    Early Warning Indicators; Financial Stability; Markov Switching;
    All these keywords.

    JEL classification:

    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models

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