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<p>This study examines the transmission of coal-market volatility to Indonesia’s financial system during the 2023–2025 downstreaming phase. Using a six-variable Vector Autoregression and generalized forecast-error variance decomposition on 671 daily observations (ICI4, Newcastle futures, ADRO, PTBA, LQ45, and USD/IDR), the analysis reveals a low-to-moderate connectedness system (TSI = 14.41%). Newcastle emerges as the dominant shock transmitter, while ICI4 operates as a net shock absorber, indicating that global coal-price volatility is largely imported into Indonesia, with domestic price controls limiting outward propagation. Firm-level exposures are asymmetric: export-oriented ADRO is highly responsive to Newcastle, confirming H1a, whereas PTBA despite its domestic mandate, exhibits stronger global sensitivity, rejecting H1b and reflecting an opportunity-cost valuation mechanism. Markov-switching results show that high-volatility regimes are rare and short-lived, and event-study estimates confirm semi-strong market efficiency, with only the initial coal-to-DME announcement generating significant abnormal returns. Overall, downstreaming deepens structural coal dependence yet produces contained financial spillovers, although state-linked coal equities carry latent transition risks requiring forward-looking macroprudential oversight.</p>

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Locked into transition: coal market spillover dynamics and financial system connectedness in Indonesia’s downstreaming era

  • 期刊论文

  • 发表日期：

    2026年5月20日

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  • Syamsul Bachri Soamole

摘要

This study examines the transmission of coal-market volatility to Indonesia’s financial system during the 2023–2025 downstreaming phase. Using a six-variable Vector Autoregression and generalized forecast-error variance decomposition on 671 daily observations (ICI4, Newcastle futures, ADRO, PTBA, LQ45, and USD/IDR), the analysis reveals a low-to-moderate connectedness system (TSI = 14.41%). Newcastle emerges as the dominant shock transmitter, while ICI4 operates as a net shock absorber, indicating that global coal-price volatility is largely imported into Indonesia, with domestic price controls limiting outward propagation. Firm-level exposures are asymmetric: export-oriented ADRO is highly responsive to Newcastle, confirming H1a, whereas PTBA despite its domestic mandate, exhibits stronger global sensitivity, rejecting H1b and reflecting an opportunity-cost valuation mechanism. Markov-switching results show that high-volatility regimes are rare and short-lived, and event-study estimates confirm semi-strong market efficiency, with only the initial coal-to-DME announcement generating significant abnormal returns. Overall, downstreaming deepens structural coal dependence yet produces contained financial spillovers, although state-linked coal equities carry latent transition risks requiring forward-looking macroprudential oversight.