The Hidden Fragility of Modern Economies: Dynamic Interactions between Financial Stress and Worker Resilience in IMT-GT

This study examines the dynamic relationship between financial stress and the economic resilience of working households in the Indonesia–Malaysia–Thailand Growth Triangle (IMT-GT). Household economic resilience is represented by gross savings, while financial stress is measured through net foreign assets, net domestic credit, bank nonperforming loans, and vulnerable employment. Using annual panel data from Indonesia, Malaysia, and Thailand for the period 2006–2024, this study applies a Panel Vector Autoregression (PVAR) approach complemented by Generalized Impulse Response Function (GIRF) and Forecast Error Variance Decomposition (FEVD) analyses. The results reveal that net foreign assets positively influence household savings and strengthen long-term economic resilience. In contrast, net domestic credit expansion and vulnerable employment tend to weaken households’ ability to maintain savings, indicating increased financial fragility. GIRF results show that shocks to net foreign assets generate a persistent positive response in gross savings, while shocks to vulnerable employment produce a sustained negative response. FEVD findings indicate that financial variables, particularly net domestic credit and net foreign assets, contribute more substantially to variations in gross savings than labor market factors. These findings suggest that worker resilience in the IMT-GT region is increasingly dependent on financial system stability and is vulnerable to excessive leverage and labor market insecurity. The study highlights the importance of integrating macroprudential financial policies with labor market reforms to strengthen household resilience and support sustainable regional economic development.