Title: Predicting banking turmoil in Indonesia with the Markov Switching Var approach
Authors:
- Aam Slamet Rusydiana
- Irfan Nurfalah
- Nisful Laila
Department: Islamic Economics
Journal Name: Journal of Economics and Development
Kinds of Journal: Sinta 2
Keywords: Dual Monetary System, Early Warning, Ms-Var
ABSTRACT
This research aims to detect the early indicators of conventional banking and Islamic banking crises, identify the Longest Period of Crisis between the two banks and compare the stability between the two. The method used is the markov switching vector autoregressive (MS-var) approach, where the advantage of this approach is the threshold value of the crisis index (threshold) is an endogenous variable in other words the crisis period and the crisis period and the duration of the crisis is part of the estimation. Leading Micro Indicators for Conventional Banking Are Cash Ratio and Leading Macro Indicators for Conventional Banking Are Interest Rates. While the leading micro indicators for sharia banking are bank deposits and cash ratios as well as leading macro indicators for sharia banking, namely interest rates, inflation, domestic credit, money supply and current account/gdp. The Z-Score of Conventional Banking is Higher (10.98) than the Z-Score of Islamic Banking (9.93) meaning that in general conventional banking is more stable than Islamic banking. But the Longest Distress Period Experienced by Conventional Banking is around October 2014 - January 2016 While the period of Islamic Banking District Around January 2008 - December 2008.
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