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Household financial vulnerability in Indonesia: Measurement and determinants

Author

Listed:
  • Noerhidajati, Sri
  • Purwoko, Agung Bayu
  • Werdaningtyas, Hesti
  • Kamil, Amalia Insan
  • Dartanto, Teguh

Abstract

This study assesses the level of financial vulnerability of Indonesian households using data from the Household’s Balance Sheet Survey (Survei Neraca Rumah Tangga/SNRT) 2016 and 2017. The SNRT are micro-unit of household data that contains information on preferences and behavior. Through both objective and subjective measurements of the Household Financial Vulnerability Index (FVI), we find that the financial vulnerability of Indonesian households is not only strongly influenced by income factors, but also by finance-related behavioral characteristics and several socio-economic factors. As a consistency and robustness check, we also estimate econometric models using the Indonesian Family Life Survey (IFLS) panel data for the periods 1993, 1997, 2000, 2007 and 2014. Our study then conclude that the level of household financial vulnerability decreased in 2017. Moreover, the study suggests that we should carefully monitor the behaviour of middle income group as they contribute significantly to the household financial vulnerability in Indonesia.

Suggested Citation

  • Noerhidajati, Sri & Purwoko, Agung Bayu & Werdaningtyas, Hesti & Kamil, Amalia Insan & Dartanto, Teguh, 2021. "Household financial vulnerability in Indonesia: Measurement and determinants," Economic Modelling, Elsevier, vol. 96(C), pages 433-444.
    • Handle: RePEc:eee:ecmode:v:96:y:2021:i:c:p:433-444
    DOI: 10.1016/j.econmod.2020.03.028
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    References listed on IDEAS

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    1. Dartanto, Teguh & Otsubo, Shigeru, 2016. "Intrageneration Poverty Dynamics in Indonesia: Households’ Welfare Mobility Before, During, and After the Asian Financial Crisis," Working Papers 117, JICA Research Institute.
    2. Atif Mian & Amir Sufi, 2011. "House Prices, Home Equity-Based Borrowing, and the US Household Leverage Crisis," American Economic Review, American Economic Association, vol. 101(5), pages 2132-2156, August.
    3. Cynamon Barry Z. & Fazzari Steven M., 2008. "Household Debt in the Consumer Age: Source of Growth--Risk of Collapse," Capitalism and Society, De Gruyter, vol. 3(2), pages 1-32, October.
    4. Yijia Lin & Martin F. Grace, 2007. "Household Life Cycle Protection: Life Insurance Holdings, Financial Vulnerability, and Portfolio Implications," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 74(1), pages 141-173, March.
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    6. Nicolas Albacete & Peter Lindner, 2013. "Household Vulnerability in Austria – A Microeconomic Analysis Based on the Household Finance and Consumption Survey," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 25, pages 57-73.
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    Cited by:

    1. Xiao, Yao, 2024. "Financial availability and rural household asset allocation," Finance Research Letters, Elsevier, vol. 62(PB).
    2. Erzsébet Németh & Boglárka Deák-Zsótér & Botond Géza Kálmán, 2024. "Order Creates Value: Personality, Attitudinal and Behavioral Factors of Financial Vulnerability," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 19(1), pages 1-21, Enero - M.
    3. M. M. Naeser Seldal & Ellen K. Nyhus, 2022. "Financial Vulnerability, Financial Literacy, and the Use of Digital Payment Technologies," Journal of Consumer Policy, Springer, vol. 45(2), pages 281-306, June.
    4. Wu, Kai & Wan, Shijia, 2023. "Job stability and household financial vulnerability: Evidence from field surveys in China," Finance Research Letters, Elsevier, vol. 58(PC).
    5. Sara Fernández-López & Marcos à lvarez-Espiño & Lucía Rey-Ares, 2023. "A Comprehensive Approach to Measuring Financial Vulnerability and Literacy: Unveiling Connections," SAGE Open, , vol. 13(4), pages 21582440231, November.
    6. Matthias Enzinger & Melanie Koch & Aleksandra Riedl, 2022. "Financial vulnerabilities and debt at risk of CESEE borrowers: a cross-country analysis," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 44, pages 25-44.

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    More about this item

    Keywords

    Household finance; Financial Vulnerability Index; Measurement; Determinants; Indonesia;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General

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