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Enhancing Resilience to Turbulent Global Financial Markets: An Indonesian Experience

Economics and Finance in Indonesia

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Field Value
 
Title Enhancing Resilience to Turbulent Global Financial Markets: An Indonesian Experience
 
Creator Indrawati, Sri Mulyani
Diop, Ndiame
Ikhsan, Mohamad
Kacaribu, Febrio
 
Subject —
 
Description In the empirical literature, large and abrupt declines in capital inflows, or sudden stops, typically hit asset markets and generate output losses in the receiving countries. The significant decrease in capital flows to emerging markets in 2018 is a unique opportunity to test this premise. Using Indonesian data, we found that the sharp decline in capital inflows for over two consecutive quarters in 2018 had an adverse impact on the currency, equities, and bond markets, but no discernible output loss was recorded. Real GDP growth remained resilient throughout 2018 and held broadly steady at around 5 percent in the first quarter of 2019. Furthermore, asset markets rebounded quickly, regaining most of the losses incurred by March 2019. We attribute this resilience to Indonesia’s strong macroeconomic fundamentals and responsive fiscal and monetary policies. We argue that to sustain this resilience in the years to come, complementary structural reforms to boost export-oriented FDI would be needed. The 2020 COVID-19 global pandemic has put the emerging economies to the test again, with a possibly more significant impact. We will revisit our analysis in the future in the aftermath of the pandemic. 
 
Publisher Institute for Economic and Social Research
 
Contributor —
 
Date 2020-06-25
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://efi.ui.ac.id/index.php/efi/article/view/683
10.47291/efi.v66i1.683
 
Source Economics and Finance in Indonesia; Volume 66, Number 1, June 2020; 47-63
2442-9260
0126-155X
 
Language eng
 
Relation http://efi.ui.ac.id/index.php/efi/article/view/683/pdf
 
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