Title: Contagion and systemic risks: the case of Indonesian banking

Authors: Alfiana; Ernie Tisnawati Sule; Sutisna; Dian Masyita

Addresses: Doctorate Program in Management (DIM), Faculty of Economics and Business, Universitas Padjadjaran, Jl. Dipati Ukur No. 46, Bandung 40132, Indonesia ' Doctorate Program in Management (DIM), Faculty of Economics and Business, Universitas Padjadjaran, Jl. Dipati Ukur No. 46, Bandung 40132, Indonesia ' Doctorate Program in Management (DIM), Faculty of Economics and Business, Universitas Padjadjaran, Jl. Dipati Ukur No. 46, Bandung 40132, Indonesia ' Doctorate Program in Management (DIM), Faculty of Economics and Business, Universitas Padjadjaran, Jl. Dipati Ukur No. 46, Bandung 40132, Indonesia

Abstract: Contagion was the core of systemic risk (Djikman, 2010) and should positively correlate with systemic risk as Poghosyan and Cihak (2009) and Oet et al. (2013) studied. This study aimed at determining contagion effect on systemic risk and direction relationship by means of regression in the presence of, or in the absence of one-month lag. This verificatory study applied explorative research methodology and used secondary data. In contrast to the previous studies, the result showed that contagion negatively correlated to the systemic risk in the Indonesian banking 2007-2014. The study found contagion effect on the systemic risk with directional relationships ranging from -10.641% to +4.389%.

Keywords: contagion; endogenous risk; interbank liabilities; regression; systemic risk.

DOI: 10.1504/IJBG.2017.087223

International Journal of Business and Globalisation, 2017 Vol.19 No.3, pp.396 - 413

Received: 19 Nov 2015
Accepted: 23 Jun 2016
Published online: 11 Oct 2017 *

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