{
  "title": "Indonesia: Selected Issues",
  "publication": "IMF Staff Country Reports, June 25, 2023",
  "sourceUrl": "https://www.imf.org/en/publications/cr/issues/2023/06/22/indonesia-selected-issues-535065",
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  "summary": "The Selected Issues paper discusses lessons for a changing investor base in Indonesia. The decision of different investors to hold local-currency (LC) government debt can reflect both global and domestic conditions.",
  "sections": [
    {
      "heading": "Summary findings",
      "content": "- The paper examines lessons for a changing investor base in Indonesia, focusing on decisions of different investors to hold local-currency (LC) government debt and how these reflect global and domestic conditions.\n- Results point to the importance of global factors especially for nonresidents (NRs).\n- Domestic investor holdings are mostly associated with higher debt security issuances.\n- Bank of Indonesia acts as a residual financier under adverse conditions.\n- Results are mostly robust to different specifications.\n- NR holdings of LC debt support the bond market and domestic credit, but financial market volatility may be higher."
    },
    {
      "heading": "Investor base dynamics and marginal investors",
      "content": "- The paper finds that domestic banks and nonbanks are typically the marginal investors of new LC debt issued in emerging markets (EM).\n- In normal times, domestic banks and nonbanks absorb most of the new issuances of LC debt in the sample of EMs.\n- During episodes of large declines in the NR share of LC debt, domestic nonbanks assume the key role in absorbing new debt supply.\n- This shift in marginal investor roles has implications for market depth and volatility, given varying capacities of investor groups."
    },
    {
      "heading": "Implications for Indonesia",
      "content": "- The finding that domestic nonbanks are critical during large NR share declines is important for Indonesia, given the limited role of domestic nonbanks in the economy.\n- Further deepening of the domestic retail investor base, in line with the Indonesian authorities’ medium-term debt strategy, could:\n  - Support market depth.\n  - Reduce volatility in LC government debt markets."
    },
    {
      "heading": "Key statistics and publication metadata",
      "content": "- Pages: 28\n- Volume: 2023\n- Issue: 222\n- Series: Country Report No. 2023/222\n- DOI: https://doi.org/10.5089/9798400247125.002\n- Stock No: 1IDNEA2023003\n- ISBN: 9798400247125\n- ISSN: 1934-7685\n- Publication date shown on the landing page: June 25, 2023\n\nInternational Monetary Fund. Asia and Pacific Dept \"Indonesia: Selected Issues\", IMF Staff Country Reports 2023, 222 (2023).\n\n---\n\n Content in this bundle\n\n- Indonesia: Selected Issues; IMF Country Report No. 23/222; May 5, 2023\n  - Indonesia: Selected Issues; IMF Country Report No. 23/222; May 5, 2023 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Indonesia: Selected Issues; IMF Country Report No. 23/222; May 5, 2023 (PDF){rel=\"external\" type=\"application/pdf\"}"
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    "Published: June 25, 2023",
    "Series: IMF Staff Country Reports",
    "DOI: https://doi.org/10.5089/9798400247125.002",
    "The paper examines lessons for a changing investor base in Indonesia, focusing on decisions of different investors to hold local-currency (LC) government debt and how these reflect global and domestic conditions.",
    "Results point to the importance of global factors especially for nonresidents (NRs).",
    "Domestic investor holdings are mostly associated with higher debt security issuances.",
    "Bank of Indonesia acts as a residual financier under adverse conditions.",
    "Results are mostly robust to different specifications.",
    "NR holdings of LC debt support the bond market and domestic credit, but financial market volatility may be higher.",
    "The paper finds that domestic banks and nonbanks are typically the marginal investors of new LC debt issued in emerging markets (EM).",
    "In normal times, domestic banks and nonbanks absorb most of the new issuances of LC debt in the sample of EMs.",
    "During episodes of large declines in the NR share of LC debt, domestic nonbanks assume the key role in absorbing new debt supply.",
    "This shift in marginal investor roles has implications for market depth and volatility, given varying capacities of investor groups.",
    "The finding that domestic nonbanks are critical during large NR share declines is important for Indonesia, given the limited role of domestic nonbanks in the economy.",
    "Further deepening of the domestic retail investor base, in line with the Indonesian authorities’ medium-term debt strategy, could:",
    "Pages: 28",
    "Volume: 2023",
    "Issue: 222",
    "Series: Country Report No. 2023/222",
    "DOI: https://doi.org/10.5089/9798400247125.002",
    "Stock No: 1IDNEA2023003",
    "ISBN: 9798400247125",
    "ISSN: 1934-7685",
    "Publication date shown on the landing page: June 25, 2023",
    "**Indonesia: Selected Issues; IMF Country Report No. 23/222; May 5, 2023**"
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