DEVINA KARIN KHRISNATI, 041011098 and Wasiaturrahma, Dr (2020) The Effect of Macroeconomic Variables on Macroprudential Indicators in Indonesia from the First Quarter of 2003 to the Fourth Quarter of 2013. International Journal of Innovation, Creativity and Change, 11 (9). pp. 623-640. ISSN 2201-1315, eISSN: 2201-1323

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Abstract

The macroprudential policy aims to mitigate the risk of financial systems to reduce the spread of negative impacts on macroeconomics. The macroprudential policy can be measured by using Financial Soundness Indicators (FSIs), including the Vector Error Correction Model (VECM) approach to analyse the influence and impact of a policy in the model. The variables in this study were modified into seven endogenous variables consisting of macroeconomic variables such as Consumer Price Index (CPI), Gross Domestic Product (GDP) growth, interest rate spread (IRS), lending interest rate (LIR) and foreign exchange reserves (DEV). Also, there were two macroprudential indicators, namely the ratio of Non-Performing Loans (NPL) and Capital Adequacy Ratio (CAR), which were divided into two models. This study aims to determine the significance and the effect of macroeconomic variables on macroprudential indicators in Indonesia during the first quarter of 2003 to the fourth quarter of 2013. Macroeconomic variables used include consumer price indices, GDP growth rate, interest rate spread, lending interest rate, and foreign exchange reserves. The result of this study indicates that the resilience of the financial system in Indonesia is maintained amid the economic slowdown/downturn. Therefore, it does not cause any systemic effect that disrupts the financial system stability.

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