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Assessing Corporate Vulnerabilities in Indonesia: A Bottom-Up Default Analysis
Author: Mr. Jorge A Chan-Lau, Weimin Miao, Mr. Ken Miyajima, and Mr. Jongsoon Shin
Series:
IMF Working Papers
Volume/Issue:
Volume 2017: Issue 097
Language:
English
Publication Date:
26 Apr 2017
DOI:
https://doi.org/10.5089/9781475595130.001
ISBN:
9781475595130
ISSN:
1018-5941
Pages:
22
Keywords:
WP; interest rate; Corporate sector; bottom-up default analysis; default risk; scenario analysis; simulation; Indonesia; hazard rate models; rollover Needs; FX debt; corporates manage currency risk; BuDA framework; default probability; heightened debt risk; Hedging; Currencies; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Under adverse macroeconomic conditions, the potential realization of corporate sector vulnerabilities could pose major risks to the economy. This paper assesses corporate vulnerabilities in Indonesia by using a Bottom-Up Default Analysis (BuDA) approach, which allows projecting corporate probabilities of default (PDs) under different macroeconomic scenarios. In particular, a protracted recession and the ensuing currency depreciation could erode buffers on corporate balance sheets, pushing up the probabilities of default (PDs) in the corporate sector to the high levels observed during the Global Financial Crisis. While this is a low-probability scenario, the results suggest the need to closely monitor vulnerabilities and strengthen contingency plans.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund