Investigation of external and internal shock in the stability of Indonesia’s financial system

Abstract

The objective of this research is to develop a financial system stability index and analyze the internal and external factors that we expect to affect the stability of the Indonesian financial system. We measured the single model of financial system stability index (FSSI) from year 2004M03 to2014M09 in Indonesia, and compiled a single quantitative measure based on aggregate internal factors and external factors to capture and predict the shocks of the financial system stability. Stability parameters were composed of composite indicators on different bases. In addition, we developed a comprehensive index component associated with the relevant market conditions, including banking soundness index, financial vulnerability index, and regional economic climate index. Results stated that US economic growth and economic growth of ASEAN countries positively affected financial stability. In addition, current account, exchange rate, inflation, interest rate were shown to negatively affect financial stability. The results of this study imply that internal factors have a strong influence on the financial stability. Therefore, the central bank should give a fast and correct response to the changes of external and internal financial environment, especially for internal factors through monetary policy.

Assessing financial stability in Southeast Europe (SEE): An econometric perspective

“…For instance, Patria Yunita (2022) found that the Islamic Banking Stability Index influences financial stability, highlighting the stability brought about by certain banking practices (Yunita, 2022). Similarly, Maulina Vinus and Suhal Kusairi (2017) reported that banking soundness is a component of financial stability, affirming the positive effect of banking stability on overall financial stability (Vinus & Kusairi, 2017). However, our study advances this understanding by quantifying the specific impact of BSI on FSI and examining additional variables like IR, GDP, and PD in relation to FSI.…”

The Impact of COVID-19 on the Congolese Financial System : An empirical Investigation

“…Theoretical preconceptions have shown that the impact of COVID on the financial system passes through several channels linked to uncertainty and loss of income. Following old and recent work (Carrera and Lanteri, 2007;Ramayandi, 2011;Fornari and Stracca, 2013;Caldara et al, 2016;Vinus and Kusairi, 2017;Boissay et al, 2020;Zabai, 2020;, we use an econometric framework of autoregressive vector Bayesian to quantify the impact of COVID-19 on the financial system. We estimate the model using the monthly series from December 2013 to Oct. 2020.…”