DOES FINANCIAL DEVELOPMENT ABSORB OR AMPLIFY THE SHOCK? | Zendy

Meily Ika Permata | Zendy; Ibrahim Ibrahim | Zendy; Hidayah Dhini Ari | Zendy

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DOES FINANCIAL DEVELOPMENT ABSORB OR AMPLIFY THE SHOCK?

Author(s) -

Meily Ika Permata,

Ibrahim Ibrahim,

Hidayah Dhini Ari

Publication year - 2012

Publication title -

deleted journal

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.505

H-Index - 4

ISSN - 2460-9196

DOI - 10.21098/bemp.v14i2.81

Subject(s) - shock (circulatory) , volatility (finance) , economics , monetary economics , vector autoregression , finance , econometrics , macroeconomics , medicine

This paper analyzes the role of financial development on economic output in Indonesia. Using vector autoregressive method, the results confirm the positive impact of financial development on output growth. The interaction between the financial development and the shock either in financial or real sector shows that the financial development has a positive role to dampen the negative impact of the shock on the output growth, while strengthen the positive one. Another variable on the model, which significantly affect the output growth are excess money, term of trade, and the price. Compare to these variables, the marginal effect of financial development on output is smaller. JEL Classification : E44, O16 Keywords : Financial development, shock, output volatility, VAR

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