FEB UI and Bank Indonesia: Towards Financial System Stability Scientific Work Contest 2020
Nino Eka Putra ~ FEB UI Public Relations Officer
DEPOK – The Faculty of Economics and Business, Universitas Indonesia, in collaboration with Bank Indonesia (BI), held a webinar to promote the “Towards Financial System Stability Scientific Work Contest 2020″, on Friday (3/7/2020).
The contest took “The Role of Sustainable Finance in Supporting Financial System Stability” as its theme. Following are the sub-themes of this year’s contest: (1) Financial sector’s contribution to the Sustainable Development Goals within the framework of Financial System Stability (SSK); (2) Impact of pandemic disease on SSK; (3) Potential impact of relocating the capital city of the Republic of Indonesia on the financial sector, (4) Vulnerability of non-bank financial institutions and their impact on SSK, and (5) Household financial behavior and its impact on SSK. Participants should send their scientific works to the contest committee not later than 19 September 2020. The contest offers the following cash prizes: 1st place, Rp40 million, 2nd place, Rp30 million, 3rd place, Rp 20 million, 1st runner up, Rp 10 million, and 2nd runner, Rp7.5 million.
The competition aims at improving research communication between academics and the regulator (BI) within the framework of BI’s macroprudential policy making process and increase research interest and ability. Meanwhile, contest organizers aim at improving the quality and quantity of research submitted by participants. .
Speakers at the event to promote the competition were Cicilia A. Harun, Ph.D., Deputy Director of the Department of Macroprudential Policy at BI, and Prof. Dr. Irwan Adi Ekaputra, MM, Head of the Master’s Degree Program in Management Sciences at FEB UI. The event was moderated by Dr. Dwi Nastiti Danarsari, Research and Community Service Manager at FEB UI. Three lecturers and researchers from FEB UI served as responders: Zaafri Ananto Husodo, Ph.D., Jahen Fachrul Rezki, M.Sc., and Dr. R. Nugroho Purwantoro.
Dr. Beta Yulianita Gitaharie, Acting Dean of FEB UI, said in her opening remarks that FEB UI considers as important the results of research conducted by academicians that have a significant impact on policy makers, both the government and regulators. Therefore, FEB UI welcomed BI’s initiative to hold the contest. It is hoped that lecturers, researchers, postgraduate or doctoral students, especially those from FEB UI, will participate in the competition through the development of quality research. The contest is also expected to produce research results on various subjects that are useful for BI, particularly in the development of macroprudential policies.
Cicilia A. Harun, the first speaker, explained that BI maintains SSK through regulatory and supervisory role in the macroprudential sector to prevent and reduce systemic risk, promote a balanced and quality intermediation function, and improve financial access. The operational strategy is a series/path in exercising BI’s authority.
“BI’s research on SSK is important to increase the credibility of the resulting policies (international standards, methodologies and theories that can be justified), risk mitigation and crisis prevention that is more accurate, easy to compare and benchmark with other authorities, especially international peers, as promotion and training materials for transfer of technology to the next generation,” said Cicilia.
Cicilia went on to say that there are five types of SSK research by BI: First, frontier research (models and frameworks), research on strategic issues related to the structure, fundamentals, frameworks such as capital flow and bank loan in Indonesia, the development of banking projection/simulation models, macroprudential policy frameworks, and supervisory framework. Second, policy research that supports policy formulation process. Third, research development tools/methodologies to support macroprudential supervision. Fourth, other types of research to capture the behavior of economic agents in the financial system. Fifth, research and other studies on certain issues, such as follow-up of BI Board of Governors meetings.
“Public involvement with SSK in the macroprudential field, including the publication of international journals, joint research with universities and members of the Financial System Stability Work, and the annual SSK scientific work competition (minimum requirement for undergraduate students, topics are determined at the outset, independent external judges – with a presentation),” Cicilia concluded.
Irwan Adi Ekaputra, the second speaker, gave a presentation entitled “Foreign Portfolio Investment Flows and Exchange Rate: Indonesia Evidence” to explain factors that affect changes in exchange rates in the short term. Of course, factors that motivate exchange rate is a very crucial element in Indonesia’s economy that can be used as a reference for the State Budget, businesses/business players, and BI.
According to the theory of economics, the short and medium-term exchange rate dynamics cannot be predicted using macroeconomic variables. However, short-term capital flows into a country can predict exchange rate dynamics. Capital flows will encourage supply and demand on the forex market. In addition, high capital inflows will strengthen exchange rates.
“Overall, exchange rates can affect capital flows to the stock market, but not the other way around. We find that a stronger exchange rate in the capital market will encourage investors to enter the stock market and vice versa. Meanwhile, in the bond market, there is feedback or mutual influence that can determine the short time dynamics of the rupiah exchange rate compared to capital flows to the stock market,” said Irwan.
“Among our recommendations is for BI to maintain the rupiah exchange rate and monitor the dynamics of the bond market. The Minister of Finance must also build and strengthen the bond stabilization framework, and maintain bond ratings against investment levels,” Irwan concluded. (hjtp)
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