Evaluating Financial System Stability Using Heatmap from Aggregate Financial Stability Index with Change Point Analysis Approach

Apriliani Gustiana () and Nasrudin
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Apriliani Gustiana: Badan Pusat Statistik
Nasrudin: Politeknik Statistika STIS

Asia-Pacific Financial Markets, 2021, vol. 28, issue 3, No 3, 367-396

Abstract: Abstract The financial system stability is an important issue to be evaluated and controlled in order to withstand the threat of a crisis that may occur in Indonesia. Bank Indonesia has constructed Indeks Stabilitas Sistem Keuangan (ISSK) to respond the issue, but ISSK is not considering global economy effect into the index construction. While there is another measurement called Aggregate Financial Stability Index (AFSI) that capable to consider both global economy and ISSK dimensions. However, each dimension is considered to have the same contribution to AFSI, despite the contributions are different in fact. Therefore, this research aims to construct AFSI using Change Point Analysis (CPA) on weighting stage for showing that each dimension has different contribution. The constructed AFSI was good and was able to capture crisis period that occurred in Indonesia during the research period. In addition, AFSI using CPA also utilized for knowing source of instability in each period using a heatmap. In general, instability that occurred in Indonesia dominantly caused by the vulnerability of financial system. This research also found that each period of crisis always follows by pressure from global economic condition. AFSI using CPA is expected to be an alternative or support measure of ISSK in determining related policies.

Keywords: Aggregate financial stability index; Change point analysis; Heatmap; Financial system stability (search for similar items in EconPapers)
JEL-codes: C12 C43 C51 F41 G01 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10690-020-09326-0

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