Title : Vulnerability Analysis of Macroeconomic Indicators for Early Detection of Exchange Rate Crisis (Case Study of the Indonesian Economy 1991-2018)
Author : Hadi Sutrisno
Universitas Airlangga
Item Type : Thesis (Dissertation)
Abstract
This research aims to carry out early detection of the exchange rate crisis in Indonesia by exploring the vulnerability of macroeconomic variables as an indication/signal of whether or not a crisis will occur. In determining the crisis period, this research uses EMPI (Exchange Market Price Index) modeling by setting a threshold at a certain value. Determining early indicators in this research uses a signal analysis approach to determine the level of vulnerability of each macroeconomic variable, then used to determine Leading Indicators based on the most vulnerable macroeconomic variables (four early indicators). Detecting signals of impending crisis using two approaches to see which one produces the best detection, namely the Signal Analysis approach and the Herrera-Garcia approach, where both models are based on the Composite Index produced from the Leading Indicator. The results of both modeling concluded that the Signal Analysis approach produced signals with better performance in detecting crises compared to the Herrera-Garcia approach. The role of Fundamental factors and Contagion Effect on EMPI as a representation of the exchange rate crisis, modeling is carried out using the Polynomial Distributed-Lag Model. Modeling is carried out by comparing the involvement of all macroeconomic variables versus only involving Leading Indicators in relation to Fundamentals. Modeling involving all macroeconomic variables shows that both fundamental factors and the contagion effect play a role in EMPI. Modeling involving the Leading Indicator shows that the Contagion Effect does not play a significant role in EMPI, or in other words the Leading Indicator has a very dominant role in determining EMPI behavior.
Keywords: Exchange Rate Crisis, Exchange Market Price Index, Early Indicators, Leading Indicator, Signal Analysis, Herrera-Garcia Model, Fundamental, Contagion Effect, Polynomial Distributed-Lag Model
