Early Warning System for Property Price Bubble in Indonesia and Strategy to Prevent Business Failure Rudi Purwono, Pradiska Lidya Permata, R. Dimas Bagas Herlambang
Faculty of Economics and Business, Universitas Airlangga
Faculty of Economics and Business, Universitas Airlangga
Faculty of Economics and Business, Universitas Airlangga
Abstract
Global Financial Crisis in 2008 should be a prominent example on how we should aware in property price bubble. In this paper, we estimate the presence of any housing price bubble in Indonesia, and build a probabil-ity model to seek any possible determinant. Results from these estimation then act as a helpful information to develop a strategy that should be used to prevent business failure. As the predictor of price bubble, we used macroeconomic factor and macroprudential policy as it is easy to be monitored. Result from this paper suggest that the GDP growth could serve as an early warning indicator for price bubble, which implies a counter-cyclical relation with the bubble. In addition, some LTV implementation is too strict that it inducing a bubble instead of stabilizing the price. These information, along with the demonstrated procedure, could serve as an information for the firms to plan an early reaction to prevent any upcoming bubble.
Keywords: Housing bubble, Macroeconomy, Business failure, Strategy
Topic: Strategic Management, Entrepreneurship and Contemporary Issues
