IDEAS home Printed from https://ideas.repec.org/a/eco/journ1/2017-01-10.html
   My bibliography  Save this article

Balance Sheet Approach for Fiscal Sustainability in Indonesia

Author

Listed:
  • Jaka Sriyana

    (Department of Economics, Universitas Islam Indonesia, Yogyakarta, Indonesia,)

  • Abdul Hakim

    (Department of Economics, Universitas Islam Indonesia, Yogyakarta, Indonesia)

Abstract

This paper models fiscal sustainability in Indonesia using the measure of liabilities-to-asset ratio (LAR), a simple measure of a country’s balanced-sheet. It uses the approach of conditional value-at-risk (VaR), assuming normal or t distributions, to define the risky level. The conditional standard deviation in the conditional VaR is modeled using a univariate generalized autoregressive heteroscedasticity (GARCH) family model. The conditional mean equation is modeled using a simple autoregressive equation. Using quarterly data from 1990 to 2014, the paper finds that the autoregressive term significantly influences the conditional mean of LAR. It also finds that both ARCH and GARCH terms significantly influence the conditional variance. Applying the conditional variance to calculate conditional VaR with 95% confidence level, and comparing the result with the actual LAR, it finds that there are no violations occurred during the period of estimation. This means that the fiscal sustainability in Indonesia is deemed safe. The violation occurs using the confidence level of 90% only.

Suggested Citation

  • Jaka Sriyana & Abdul Hakim, 2017. "Balance Sheet Approach for Fiscal Sustainability in Indonesia," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 68-72.
  • Handle: RePEc:eco:journ1:2017-01-10
    as

    Download full text from publisher

    File URL: http://www.econjournals.com/index.php/ijefi/article/download/3289/pdf
    Download Restriction: no

    File URL: http://www.econjournals.com/index.php/ijefi/article/view/3289/pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Hausmann, Ricardo & Panizza, Ugo, 2003. "On the determinants of Original Sin: an empirical investigation," Journal of International Money and Finance, Elsevier, vol. 22(7), pages 957-990, December.
    2. Markus Rodlauer & Alfred Schipke, 2005. "Central America; Global Integration and Regional Cooperation," IMF Occasional Papers 243, International Monetary Fund.
    3. Alejandro Izquierdo & Ernesto Talvi & Guillermo A. Calvo, 2002. "Sudden Stops, the Real Exchange Rate and Fiscal Sustainability: Argentina's Lessons," Research Department Publications 4299, Inter-American Development Bank, Research Department.
    4. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
    5. Fratzscher, Marcel & Bussière, Matthieu & Koeniger, Winfried, 2004. "Currency mismatch, uncertainty and debt maturity structure," Working Paper Series 409, European Central Bank.
    6. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:eco:journ1:2017-03-95 is not listed on IDEAS

    More about this item

    Keywords

    Fiscal Sustainability; Liabilities-to-Asset Ratio; Univariate Generalized Autoregressive Heteroscedasticity; Conditional Value-at-Risk;

    JEL classification:

    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ1:2017-01-10. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ilhan Ozturk). General contact details of provider: http://www.econjournals.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.