TY - JOUR
T1 - PROPERTY PRICE, CAPITAL INFLOWS, AND FINANCIAL SYSTEM STABILITY IN ASEAN-5 ECONOMIES
T2 - A SIMULTANEOUS ANALYSIS
AU - Andini, Sonia Anggun
AU - Falianty, Telisa Aulia
N1 - Funding Information:
The credit risk exposure of property loans also greatly depends on the use of the loans. A property mortgage loan is usually considered very secure, as property is more like consumer goods, and the repayment of these loans often comes from household property income, which is relatively stable. By contrast, loans to developers and constructors for commercial purposes are much riskier. Repayment of these loans is supported by the sale or rental price generated from the property upon completion. A fall in property prices implies a deterioration in the financial position of developers and constructors. Therefore, they are unable to borrow new funds, which are essential for project completion. When the property under construction is left unfinished, the collateral value drops nearly to zero, and the commercial mortgage loan is considered a default. The increase in bad credit in the retail property sector has been a significant contributor to several banking crises, such as financial difficulties in the early 1990s in many industrialized countries and the 1997 East Asian crisis to the global financial crisis of 2008 - 2009.
Publisher Copyright:
© 2022 Central European Pragmatist Forum. All rights reserved.
PY - 2022/1/21
Y1 - 2022/1/21
N2 - Introduction/Main Objectives: This study aims to estimate the impact of capital inflows on property prices and financial system stability (FSS) in ASEAN-5 and the simultaneous relationship between the two dependent variables. During the observation period of this study, there were large capital inflows to ASEAN 5 countries after the 2008-2009 financial crisis; on the other hand property prices showed an increase in that period. Background Problems: This study indicates the simultaneous relationship between two dependent variables. In fact, using only a single equation for variables that have a simultaneous relationship can cause endogeneity problems, so the results obtained become unreliable/biased. Novelty: The novelty of our research is we fill a gap in the previous studies by examining the relationship of property prices and financial system stability with the simultaneous method so as to solve the endogeneity problem that exists. Research Methods: We use the 2SLS simultaneous panel model to solve endogeneity problems. Finding/Results: The results show that the massive capital inflows to ASEAN-5 countries caused a significant increase in property prices. Conclusion: This study confirms that property prices and financial system stability have simultaneous relationships. On the one hand, the impact of property prices on the financial system stability is positive and significant. On the other hand, testing the effect of the financial system stability on property prices does not show significant results.
AB - Introduction/Main Objectives: This study aims to estimate the impact of capital inflows on property prices and financial system stability (FSS) in ASEAN-5 and the simultaneous relationship between the two dependent variables. During the observation period of this study, there were large capital inflows to ASEAN 5 countries after the 2008-2009 financial crisis; on the other hand property prices showed an increase in that period. Background Problems: This study indicates the simultaneous relationship between two dependent variables. In fact, using only a single equation for variables that have a simultaneous relationship can cause endogeneity problems, so the results obtained become unreliable/biased. Novelty: The novelty of our research is we fill a gap in the previous studies by examining the relationship of property prices and financial system stability with the simultaneous method so as to solve the endogeneity problem that exists. Research Methods: We use the 2SLS simultaneous panel model to solve endogeneity problems. Finding/Results: The results show that the massive capital inflows to ASEAN-5 countries caused a significant increase in property prices. Conclusion: This study confirms that property prices and financial system stability have simultaneous relationships. On the one hand, the impact of property prices on the financial system stability is positive and significant. On the other hand, testing the effect of the financial system stability on property prices does not show significant results.
KW - 2sls
KW - Capital inflows
KW - Financial system stability
KW - Property price
KW - Simultaneous analysis
UR - http://www.scopus.com/inward/record.url?scp=85124597344&partnerID=8YFLogxK
U2 - 10.22146/jieb.v37i1.1406
DO - 10.22146/jieb.v37i1.1406
M3 - Article
AN - SCOPUS:85124597344
SN - 2085-8272
VL - 37
SP - 15
EP - 38
JO - Journal of Indonesian Economy and Business
JF - Journal of Indonesian Economy and Business
IS - 1
ER -