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Macroeconomics of Systemic Risk: Transmission Channels and Technical Integration

Author

Listed:
  • Mohamad Rizan

    (Faculty of Economcis, State University of Jakarta, East Jakarta 13220, Indonesia)

  • Muhammad Zulkifli Salim

    (School of Business, Western Sydney University, Penrith, NSW 2151, Australia
    Department of Banking Research and Regulation, Financial Services Authority, Jakarta 10710, Indonesia)

  • Saparuddin Mukhtar

    (Faculty of Economcis, State University of Jakarta, East Jakarta 13220, Indonesia)

  • Kevin Daly

    (School of Business, Western Sydney University, Penrith, NSW 2151, Australia)

Abstract

The avenue to find a balanced assessment of systemic financial institutions needs the integration of macro and micro granular datasets. This paper investigates how macroeconomic shocks affect systemic risk through several transmission channels. Employing Indonesia datasets over 2008–2019, we regressed three market models: CoVaR, MES, and SRISK using fixed effect, random effect, GARCH(1,1), and finite mixture models. The findings show that stock beta, market index, and exchange rate volatility amplify the systemic risk while the liquidity spread outcome varies due to different of model variables and the deepness of the country’s financial market. We propose a practical systemic risk assessment framework and samples of technical integration to capture the overall risk endogenously and externally expose the systemically important financial institutions.

Suggested Citation

  • Mohamad Rizan & Muhammad Zulkifli Salim & Saparuddin Mukhtar & Kevin Daly, 2022. "Macroeconomics of Systemic Risk: Transmission Channels and Technical Integration," Risks, MDPI, vol. 10(9), pages 1-27, September.
    • Handle: RePEc:gam:jrisks:v:10:y:2022:i:9:p:174-:d:904472
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    References listed on IDEAS

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