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Submitted
March 14, 2023
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March 21, 2023
Published
April 10, 2023
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Abstract

Purpose ― This paper estimates the possibility of a financial crisis in Indonesia using an early warning system (EWMS) model.


Method ― A quantitative EWMS model has been developed to detect a potential financial crisis in 2023 based on the econometric logistic probability model (Logit)


Findings ― Based on the model estimates, Indonesia is expected to enter a financial crisis without adequate macroeconomic policies in the next 12 to 24 months. In recent years, Indonesia has implemented prudent macroeconomic policies such as increasing the Bank Indonesia policy rate and sustaining the state budget to avoid the impact of a deep financial crisis.


Implications ― To avoid the potential for further financial crises, Indonesia must implement a wider range of crisis mitigation policies.


Originality/value ― Although many argue that financial crises are predictable, it has been demonstrated in the literature that little is known about how to prevent them. This paper contributes to providing empirical evidence to address these issues.

Keywords

Early Warning Model System (EWMS) probability of crisis Indonesian economy crisis pre-emptive and mitigation policies

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Copyright (c) 2023 Anggito, Muhammad Handry Imansyah, Muhammad Adisurya Pratama

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Author Biographies

Anggito Abimanyu, Department of Economics and Business, Vocational School, Gadjah Mada University, Yogyakarta, Indonesia

Anggito Abimanyu is associate Professor at Department of Economics, Vocational School, Gadjah Mada University. He finished his undergraduate study from Faculty of Economics, Gadjah Mada University in 1995, and Master of Science from Pensylvania University in 1989 and completed his Ph.D in 1994.

He has a wide experiences for example as the Director of Hajj Management Institution 2017-2022, Advisor for Ministry Of Planning and Development 2021-Now, Commisioner of Bank BRI Syariah 2015-2017, Director General Hajj and Umrah, Ministry of Religious Affairs 2012-2014, Expert Staff and Head of Fiscal Policy Officce, Ministry of Finance 2000-2010 and many others.

Muhammad Handry Imansyah, Master of Development Economics Program, Faculty of Economics and Business, Lambung Mangkurat University, Banjarmasin, Indonesia

Muhammad Handry Imansyah is a Professor of Economics at the Facuty of Economics and Business, Lambung Mangkurat University. He finished his undergraduate edcuation at Faculty of Economics, Gadjah Mada University in 1985, and Master of Agrisbusinesss Management at Mississippi State University in 1992, and completed his Ph.D at the Department of Economics, The Queensland University in 2002. He serve as Asian Development Bank consultant for Ministry of Finance, 2000-2007, 2009-2010, 2010-2012.

Muhammad Adisurya Pratama , Department of Development Economics, Faculty of Economics and Business, Lambung Mangkurat University, Banjarmasin, Indonesia.

He is currently  a research assistant at Research Institution for Economics and Regional Development, Economics and Development Study Program, Faculty of Economics and Business, Lambung Mangkurat University. Previously, he was a research assistant at Bank Indonesia Institute 1 Maret 2022-28 February 2023. He finished his undergraduate study from Faculty of Economics and Business, Lambung Mangkurat University in 2021.

How to Cite
Abimanyu, A. ., Imansyah, M. H., & Pratama , M. A. . (2023). Will Indonesia enter the 2023 financial crisis? Application of early warning model system. Economic Journal of Emerging Markets, 15(1), 28–41. https://doi.org/10.20885/ejem.vol15.iss1.art3
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