A risk-based premium scheme could be a reliable system to determine a fairer deposit insurance premium. This research aimed to assess Indonesian banks' risk profile, including per size classification and ownership as well as to counterfactually simulate a risk-based deposit insurance system for the individual banks. This research combined analysis of variance (ANOVA) and non-parametric approach applied to 75 banks (2008q1-2019q3). The results showed that big banks did not necessarily posture better risk management compared to small banks. Also, under the risk-based scheme, banks with better risk management could be rewarded, while less prudent banks could be punished.

The term structure of interest rates in Australia, using data of different types as well as frequencies covering the period 1991(11) to 2000(9) is investigated using a relatively new modelling strategy previously untested on Australian interest rate data. Developed by Pesaran and Shin (2002), this strategy incorporates long-run structural relationships in an otherwise unrestricted vector autoregression model (VAR). The econometric tests indicate that in Australia, contrary to popular belief, long-term interest rates more often than not lead shorter-term interest rates, at least for the interest rates and time period under investigation. While these findings are not conclusive, if they are an accurate representation of interest rate behaviour, this does pose a major challenge for the monetary policy in Australia. The findings are consistent with the recent experience of the USA as well (Sarno and Thornton, 2003). The findings of the study based on recent rigorous time-series techniques tend to cast doubts on the efficiency and effectiveness of current monetary policy in Australia.

This research contributes to the literature on the effects of fiscal and monetary policy by exploiting non-Gaussianity of the time series for the identification of a Bayesian structural vector autoregression model. Using quarterly US data from 1954:IV to 2006:IV and from 1985:I to 2020:III, we formally assess the plausibility of theoretically predicted signs to label fiscal policy, monetary policy, and business cycle shocks. The impulse responses of consumption to the fiscal policy shock depend to some extent on the sample period, but the implied fiscal multiplier is always less than unity. On investment, there is a lagging crowding-out effect with a high probability, but it is not strongly evident in the latter sample. As for the responses after a contractionary monetary policy shock, we find a weakening output after some lags consistent with the leading monetary policy literature. The business cycle shock turns out to matter for government spending only in the long run, while it is already important for the federal funds rate in the short run.

Inter-connectedness is one important aspect in measuring the degree of systemic risk arising in the banking system. In this paper, this aspect besides the degree of commonality and volatility are measured using Principal Component Analysis (PCA), dynamic Granger causality tests and a Markov regime switching model. These measures can be used as leading indicators to detect pressures in the financial system, in particular the banking system. There is evidence that the inter-connectedness level together with degree of commonality and volatility among banks escalate substantially during the financial distress. It implies that less systemically important banks could become more important in the financial system during the abnormal times. Therefore, the list of systemically important banks as regulated in the Law on Prevention and Mitigation of Financial System Crisis (UU PPKSK) should be updated more frequently during the period of financial distress.