Macroeconomics of Systemic Risk: Transmission Channels and Technical Integration

Mohamad Rizan, Muhammad Zulkifli Salim (), Saparuddin Mukhtar and Kevin Daly
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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
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

Risks, 2022, vol. 10, issue 9, 1-27

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.

Keywords: systemic risk; interconnectedness; financial crises; macroeconomics; market model (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2022
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