Open AccessPrediction of currency crisis in Indonesia using combined volatility and Markov regime switching models based on lending interest rate / deposit interest rate indicator
Author(s) -
. Sugiyanto,
Etik Zukhronah,
Isnandar Slamet
Publication year - 2019
Publication title -
journal of physics. conference series
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.21
H-Index - 85
eISSN - 1742-6596
pISSN - 1742-6588
DOI - 10.1088/1742-6596/1341/9/092012
Subject(s) - interest rate , economics , currency crisis , currency , volatility (finance) , financial crisis , monetary economics , autoregressive conditional heteroskedasticity , markov chain , econometrics , macroeconomics , statistics , mathematics
In mid of 1997, a currency crisis had a severe impact on the economy in Indonesia. Based on this situation, it is necessary to build an early warning system to anticipate the crisis events. The crisis occurred due to some macro-economic indicators fluctuated very high and the change of regime. Combined volatility and Markov regime switching models suited to explain the crisis. In this article it was used indicator of lending interest rate / deposit interest rate from 1990 to 2018. The results showed that MRS-GARCH (3,1,1) model can explain the crisis. Based on this model, it can be predicted that in 2019 there was no sign of a currency crisis in Indonesia.