Aulia Keiko Hubansyah, Zaafri Ananto Husodo

Research output: Contribution to conferencePaperpeer-review


Sustainable growth can only be reached if there is a conducive situation in financial and business sector of an economy. Thus, the interaction between these sectors will determine how well the economy can work. In this study, we examine the dynamic interactions between financial sector and business sector in ASEAN-4 Countries (Indonesia, Malaysia, Thailand and Singapore). Regard to this concern, we try to develop the previousstudies in several ways. First, we prefer to use time-varying analyses to understand the dynamics and the interaction between both sectors. We use bidirectional analysis to understand the dynamics and interactions between both sectors. It is because theoretical, as well as empirical contributions, show that the dynamics of the financial sector and business sector are basically interrelated with causality potentially coming from both directions. Second, we develop and modify the proxies for the dynamics of the financial sector and business sector. Instead of using traditional proxy such as GDP growth, we use the index of industrial production (IIP) growth as a proxy for business sector dynamics in our sample countries. We do this because it is hard to ensurethe validity and reability of the GDP data in quarterly frequencies especially for developing countries. On the other hand, output in the industrial sector corresponds roughly to output in the traded goods and is closely related to the dynamics of the business sector. So that, IIP growth is a reasonable proxy for measuring the business sector dynamics. Meanwhile, we use two variables to proxy financial sector dynamics, that are credit growth and property price index growth. They both empirically constitutea very good leading indicator of subsequent episodes of financial instability. Third, in doing time-varying analysis we determine the number of windows used in rolling window estimation through Bry-Boschan approach rather than set it arbitraly. We apply newly generalized version of vector autoregressive framework (VAR) spillover index approach proposed by Diebold (2012) as our method of analysis. Based on quarterly data on each variables over the period 1984q1-2015q4 for the ASEAN-4 countries, this study find that: 1) spillovers between variables evolve rather heterogeneously over time for each country, 2) variable that plays as the dominant transmitter crisis in each country is different between one to another, 3) in the period shortly before crisis, the link between variables become more pronounced both within and across the countries. In particular, business sector plays a dominant role during earlier stages of the crisis, while the financial sector quickly takes over as the dominant source of spillovers in deepening the crisis. 4) credit growth in Thailand is the dominant transmitter of shocks to the ASEAN-3 countries. Overall, this result suggest that the magnitude and direction of spillovers between financial and business cycle vary over time along withchanges in the economic environment.
Original languageEnglish
Publication statusPublished - 2017
EventThe 5th Gadjah Mada International Conference on Economics and Business - ID, Yogyakarta, Indonesia
Duration: 1 Jan 2017 → …


ConferenceThe 5th Gadjah Mada International Conference on Economics and Business
Period1/01/17 → …


  • business sector, financial sector, crisis, recession, spillovers.

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