Bulletin of Monetary Economics and Banking (BMEB) / Buletin Ekonomi Moneter dan Perbankan
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The Effect Of Covid-19 Pandemic On The Risks Of Investments In Indonesia: Evidence From The Egarch Model
No full textThis study analyzes the effect of the COVID-19 pandemic on the risks of gold, stocks, and the US dollar investments as well as risk comparison among those instruments. An EGARCH model is used to accommodate the asymmetric effect on the risks. To examine the pandemic effect, we use a dummy variable of before and during the pandemic and stringency index which reflects government seriousness about COVID-19 prevention. The results show that risks are higher during the pandemic while government actions reduce risks. Stocks are riskiest instrument and suitable for risk seekers. Gold is least risky and suitable for risk averter
DOES INTERNATIONAL MONETARY POLICY INFLUENCE THE BANK RISK? EVIDENCE FROM INDIA
No full textThis study empirically examines the impact of international monetary policy on bank risk in the Indian context. Using annual data from 64 banks and employing panel OLS and GMM techniques, this study finds that: (1) a contractionary international monetary policy increases bank risk; (2) an appreciation of the domestic exchange rate induces bank riskiness; (3) the domestic monetary policy affects bank risk through the “search for yield” channel; and (4) the international monetary policy is relatively significant in explaining the bank riskiness in the post-global financial crisis period
DOES CREDIT PERFORMANCE CHANGE IN THE POSTCOVID-19? EVIDENCE FROM JAVA ISLAND, INDONESIA
No full textThis paper examines the impact of the COVID-19 pandemic on credit performance of banks in Java. We have used monthly panel data from January 2016 to December 2020 of the Java region. We find that the credit performance declines during the pandemic amid the economic downturn compared to the pre-COVID-19 period. Overall, our findings suggest that the delivery of credit types has been affected except working capital. Likewise, the credit for the main economic sectors is significantly influenced by the Pandemic
CENTRAL BANK DIGITAL CURRENCY: WHAT FACTORS DETERMINE ITS ADOPTION?
No full textThis paper attempts to explain the differences in Central Bank Digital Currency (CBDC) adoption across emerging and advanced countries using an ordered probit model. Based on a cross-country dataset, we show that wholesale CBDC is more advanced in countries with developed financial markets and greater cross-border transactions. Retail CBDC is more advanced in countries with lower financial inclusion and a large informal economy. We further show that different factors affect retail CBDC adoption across emerging and advanced countries. However, cross-border transactions are the most crucial factor influencing wholesale CBDC adoption across emerging and advanced countries
THRESHOLD EFFECT IN THE RELATIONSHIP BETWEEN INFLATION RATE AND ECONOMIC GROWTH IN INDONESIA
No full textThis paper investigated the linear and nonlinear relationships between inflation and economic growth in Indonesia using provincial data from 1994 to 2019. The linear model revealed that inflation has a significant negative effect on economic growth, while the nonlinear model revealed that inflation would negatively affect economic growth only after exceeding a threshold value of 9.59 percent. Excluding a high inflationary structural break, we found an inflation threshold of 5.22 percent. Furthermore, we found that the threshold of inflation rate in the eastern regions of Indonesia was higher than that of the western regions, namely 9.64 percent and 5.75 percent, respectively. These findings have significant implications for inflation targeting and management both at the national and regional levels
THE ECONOMIC EFFECTS OF COVID-19 MITIGATION POLICIES ON UNEMPLOYMENT AND ECONOMIC POLICY UNCERTAINTY
No full textThis paper examines the effects of COVID-19 mitigation strategies and Economic Policy Uncertainty (EPU) on unemployment-rate over the period November 2019 to April 2021 for the 16 most severely COVID-19 affected countries. Our specific objectives are threefold: first, to examine the dynamic relationship between EPU and unemployment-rate; second, to analyze the extent to which government’s COVID-19 mitigation response affects the unemployment-rate; and third, to examine the effects of governments economic policies on the unemployment-rate through market indicators, such as the business and consumer confidence indices. We find that EPU increases fluctuations in unemployment for the COVID-19 affected countries, while governments’ vaccination drive significantly reduces it. Increases in government stringency aggravate unemployment in the informal sectors and enhances labor inequality
Macro-Financial Determinants Of Default Probability Using Copula: A Case Study Of Indonesian Banks
No full textWe investigate the default probability of Indonesian banks using the copula approach and analyze the macro-financial factors that drive them. We use quarterly data comprised of 80 banks from 2005 to 2019. We find empirical evidence that Common Equity Tier 1 (CET 1) ratio, inefficiency ratio, and deposit ratio have negatively impacted the bank’s default probability. We also find that macroeconomic variables such as policy rate, real exchange, economic growth, and unemployment reduce the default probability. Our study suggests that regulators should focus on capital and deposit management policies to reduce bank risk-taking behaviour. Additionally, the policy rate effectively anticipated the banks’ default risk
Pandemic Shocks And Macro-Financial Policy Responses: An Estimated Dsge-Var Model For Indonesia
No full textThis paper attempts to investigate the impact of policy mix in dealing with the COVID-19 pandemic. We employ the New Keynesian Dynamic Stochastic General Equilibrium (DSGE) framework and the Del Negro et al. (2007) approach to estimate the model. We investigate the effectiveness of policy mix in Indonesia by taking into account real and financial linkages, as well as other market imperfections. We intend to analyze and evaluate the adequacy of monetary, fiscal, and macroprudential policy by simulating each policy option using Indonesian-specific factors and comparing them. Our findings show that policy mix has a greater impact on accelerating economic recovery but does not necessarily lead to anchor inflatio
DOES INNOVATION OUTCOME INFLUENCE PERFORMANCE OF INDIAN MANUFACTURING FIRMS?
No full textThis paper investigates the impact of innovation on the performance of selected manufacturing firms in India over the period 2008-2017. Specifically, we emphasize on the role of innovation outcomes in terms of number of patents on firms’ performance and consider total factor productivity growth, firms’ growth in terms of total gross sales, and profitability as indicators of firm performance. The results based on the panel Feasible Generalized Least Square estimator shows that the effect of innovation on firms’ performance is positive. Further, the impact of innovation on performance is higher for large firms compared to small firms
FOREIGN DIRECT INVESTMENT AND WAGE SPILLOVERS IN THE INDONESIAN MANUFACTURING INDUSTRY
No full textWe examine whether Foreign Direct Investment (FDI) influences wage spillover in the manufacturing sector in Indonesia from the perspective of three recipients (dimensions): industry, province, and technology intensity. Annual data of Indonesian manufacturing firms from 2011 to 2015 is employed. Using the Fixed Effect Model, we found the spatial (province) dimension to matter the most as it consistently indicates that inward FDI depresses wages in the recipient province. When we split the observation based on firm size, FDI inflows within the technology intensive subsectors were found to discourage wages. Only FDI inflows within the host industries support higher salaries for smaller domestic firms and gains in labour productivity. The coordination between central and local governments remains essential to ensure that local companies are sufficiently competitive with foreign companies