Russian Journal of Economics and Law (Dec 2021)
Analysis of financial liberalization in Indonesia: SVAR approach
Abstract
Objective: to analyze the impact of the financial liberalization policy on the macroeconomic stability of the Indonesian economy.Methods: retrospective and econometric analysis.Results: the article updates the issues of financial liberalization policy in Indonesia. In particular, the stages of lifting currency restrictions in Indonesia are considered. The main attention is paid to the financial and economic crises taking place in Indonesia, in which financial openness is one of the reasons for the deterioration of the economic situation inside the country. The measures taken by the government to restrict the cross-border capital flows in response to the crisis are considered. The characteristic of the accompanying economic policy of Indonesia under the conditions of financial openness is given. The SVAR econometric model was applied to assess the impact of financial liberalization on the macroeconomic situation of the country. It showed that this process has a negative impact on the Indonesian economy. But the macroeconomic state of Indonesia depends not only on financial integration, but on a number of other internal macroeconomic factors that change under the influence of the national economic policy.Scientific novelty: the article systematizes the experience of financial liberalization policy in Indonesia, and develops the SVAR econometric model, which shows the importance of the financial integration process for macroeconomic indicators.Practical significance: The reviewed experience of financial liberalization in Indonesia shows the importance of currency regulation for developing countries and the risks arising in the course of policies to strengthen financial openness. The presented SVAR model provides an opportunity to study the impact of financial liberalization on the macroeconomic indicators of countries.
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