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Indonesia’S Financial Stress Events And Macroeconomic Dynamics

Author

Listed:
  • Sugiharso Safuan

    (University of Indonesia, Indonesia)

  • Eric Alexander Sugandi

    (Asian Development Bank Institute, Tokyo, Japan)

  • Okta Qomaruddin Aziz

    (Universitas Islam Negeri Maulana Malik Ibrahim Malang)

  • Risna Triandhari

    (University of Indonesia, Indonesia)

Abstract

In this study, we use a Markov-Switching Bayesian Vector AutoRegression model to investigate the episodic relationship between financial stress and the key macroeconomic variables in the case of Indonesia. We find different nature of relationships among Indonesia’s real sector variables (household consumption expenditure and consumer price index), financial sector variables (interbank money market rate) and the policy variable (broad money supply during the times of high and low financial stress). Regime changes occurred on several occasions, including during the 2008 global financial crisis period and at the beginning of the COVID-19 pandemic.

Suggested Citation

  • Sugiharso Safuan & Eric Alexander Sugandi & Okta Qomaruddin Aziz & Risna Triandhari, 2022. "Indonesia’S Financial Stress Events And Macroeconomic Dynamics," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 25(3), pages 323-370, November.
    • Handle: RePEc:idn:journl:v:25:y:2022:i:3c:p:323-370
    DOI: https://doi.org/10.21098/bemp.v25i3.1743
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    More about this item

    Keywords

    Financial stress index; Markov-switching Bayesian vector autoregression; Indonesia’s financial markets;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G00 - Financial Economics - - General - - - General

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