Gross Capital Inflows in Indonesia: Exploring Bonanzas and Sudden Stops

Authors

  • Syahid Izzulhaq Diponegoro University, Prof. Soedarto Street, Number 13, Tembalang, Tembalang District, Semarang City, Central Java 50275, Indonesia
  • Muhammad Rizal Taufikurahman Trilogy University, Jl. TMP. Kalibata No. 4, Daerah Khusus Ibukota Jakarta 12760, Indonesia; Institute for Development of Economics and Finance (INDEF), Institute for Development of Economics and Finance (INDEF), Pasar Minggu Street KM. 18 East Pejaten, Daerah Khusus Ibukota Jakarta 12510, Indonesia
  • Afaqa Hudaya Diponegoro University, Prof. Soedarto Street, Number 13, Tembalang, Tembalang District, Semarang City, Central Java, Indonesia
  • Mohammad Reza Hafiz Akbar Institute for Development of Economics and Finance (INDEF), Pasar Minggu Street KM. 18 East Pejaten, Daerah Khusus Ibukota Jakarta 12510, Indonesia

DOI:

https://doi.org/10.22452/IJIE.vol13no3.2

Keywords:

Gross capital inflows, Bonanzas, Sudden stops, Indonesia

Abstract

This paper examines episodes of capital bonanzas and sudden stops in Indonesia by utilising binary response models and several episode-identification approaches. Our identification suggests that whenever bonanza episodes occurred, capital sudden stop episodes followed in a more extended period. The estimations demonstrate that domestic factors are relatively dominant in determining the capital bonanzas, and the federal funds rate has a more significant impact on inducing the probability of capital sudden stops in Indonesia. We also found that Turkey and South Africa are the most contagious economies for Indonesia. This paper proposes some policy reforms to enhance the stability of capital inflows in Indonesia, including financial regulation and public finance policies such as a reverse Tobin tax and market-driven public debt rules.

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Published

2021-07-01

How to Cite

Izzulhaq, S., Taufikurahman, M. R., Hudaya, A., & Hafiz Akbar, M. R. (2021). Gross Capital Inflows in Indonesia: Exploring Bonanzas and Sudden Stops. Institutions and Economies, 13(3), 27–52. https://doi.org/10.22452/IJIE.vol13no3.2

Issue

Volume 13, Issue 3 (2021)

Section

Articles

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