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Evaluating Financial System Stability Using Heatmap from Aggregate Financial Stability Index with Change Point Analysis Approach

Author

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  • Apriliani Gustiana

    (Badan Pusat Statistik)

  • Nasrudin

    (Politeknik Statistika STIS)

Abstract

The financial system stability is an important issue to be evaluated and controlled in order to withstand the threat of a crisis that may occur in Indonesia. Bank Indonesia has constructed Indeks Stabilitas Sistem Keuangan (ISSK) to respond the issue, but ISSK is not considering global economy effect into the index construction. While there is another measurement called Aggregate Financial Stability Index (AFSI) that capable to consider both global economy and ISSK dimensions. However, each dimension is considered to have the same contribution to AFSI, despite the contributions are different in fact. Therefore, this research aims to construct AFSI using Change Point Analysis (CPA) on weighting stage for showing that each dimension has different contribution. The constructed AFSI was good and was able to capture crisis period that occurred in Indonesia during the research period. In addition, AFSI using CPA also utilized for knowing source of instability in each period using a heatmap. In general, instability that occurred in Indonesia dominantly caused by the vulnerability of financial system. This research also found that each period of crisis always follows by pressure from global economic condition. AFSI using CPA is expected to be an alternative or support measure of ISSK in determining related policies.

Suggested Citation

  • Apriliani Gustiana & Nasrudin, 2021. "Evaluating Financial System Stability Using Heatmap from Aggregate Financial Stability Index with Change Point Analysis Approach," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 28(3), pages 367-396, September.
    • Handle: RePEc:kap:apfinm:v:28:y:2021:i:3:d:10.1007_s10690-020-09326-0
    DOI: 10.1007/s10690-020-09326-0
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    References listed on IDEAS

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    1. Mr. Garry J. Schinasi, 2004. "Defining Financial Stability," IMF Working Papers 2004/187, International Monetary Fund.
    2. Dimitrios P. Louzis & Angelos T. Vouldis, 2013. "A financial systemic stress index for Greece," Working Papers 155, Bank of Greece.
    3. Albulescu, Claudiu Tiberiu, 2010. "Forecasting The Romanian Financial System Stability Using A Stochastic Simulation Model," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 81-98, March.
    4. Iman Gunadi & Aditya Anta Taruna & Cicilia A. Harun, 2013. "Penggunaan Indeks Stabilitas Sistem Keuangan (ISSK) Dalam Pelaksanaan Surveilans Makroprudensial," Working Papers WP/15/2013, Bank Indonesia.
    5. Marcelo Bianconi & Joe A. Yoshino & Mariana O. Machado de Sousa, 2011. "BRIC and the U.S. Financial Crisis: An Empirical Investigation of Stocks and Bonds Markets," Discussion Papers Series, Department of Economics, Tufts University 0764, Department of Economics, Tufts University.
    6. Mark Illing & Ying Liu, 2003. "An Index of Financial Stress for Canada," Staff Working Papers 03-14, Bank of Canada.
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    Cited by:

    1. Koranteng, Barbara & You, Kefei, 2024. "Fintech and financial stability: Evidence from spatial analysis for 25 countries," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 93(C).
    2. Mahjus Ekananda, 2022. "The Nonlinear Impact of Payment System Innovation on Financial System Stability in the ASEAN-4 Countries," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 68, pages 114-131, Desember.

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    More about this item

    Keywords

    Aggregate financial stability index; Change point analysis; Heatmap; Financial system stability;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • G01 - Financial Economics - - General - - - Financial Crises

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