INDONESIA’S FINANCIAL STRESS EVENTS AND MACROECONOMIC DYNAMICS

Sugiharso Safuan (), Eric Alexander Sugandi (), Okta Qomaruddin Aziz () and Risna Triandhari ()
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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

Bulletin of Monetary Economics and Banking, 2022, vol. 25, issue 3, 323-370

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.

Keywords: Financial stress index; Markov-switching Bayesian vector autoregression; Indonesia’s financial markets (search for similar items in EconPapers)
JEL-codes: C11 E44 G00 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:25:y:2022:i:3c:p:323-370

DOI: 10.21098/bemp.v25i3.1743

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