Household financial vulnerability in Indonesia: Measurement and determinants

Sri Noerhidajati; Agung Bayu Purwoko; Hesti Werdaningtyas; Amalia Insan Kamil; Teguh Dartanto

doi:10.1016/j.econmod.2020.03.028

Household financial vulnerability in Indonesia: Measurement and determinants

Econ Model. 2021 Mar:96:433-444. doi: 10.1016/j.econmod.2020.03.028. Epub 2020 Apr 2.

Authors

Sri Noerhidajati¹, Agung Bayu Purwoko¹, Hesti Werdaningtyas¹, Amalia Insan Kamil¹, Teguh Dartanto²

Affiliations

¹ Bank Indonesia, Indonesia.
² Universitas Indonesia, Indonesia.

Abstract

This study assesses the level of financial vulnerability of Indonesian households using data from the Household's Balance Sheet Survey (Survei Neraca Rumah Tangga/SNRT) 2016 and 2017. The SNRT are micro-unit of household data that contains information on preferences and behavior. Through both objective and subjective measurements of the Household Financial Vulnerability Index (FVI), we find that the financial vulnerability of Indonesian households is not only strongly influenced by income factors, but also by finance-related behavioral characteristics and several socio-economic factors. As a consistency and robustness check, we also estimate econometric models using the Indonesian Family Life Survey (IFLS) panel data for the periods 1993, 1997, 2000, 2007 and 2014. Our study then conclude that the level of household financial vulnerability decreased in 2017. Moreover, the study suggests that we should carefully monitor the behaviour of middle income group as they contribute significantly to the household financial vulnerability in Indonesia.

Keywords: Determinants; Financial Vulnerability Index; Household finance; Indonesia; Measurement.