The Impact of Macroeconomic Condition on The Banks Performance in Indonesia
Keywords:
macroeconomic shocks, state-owned banks, indicators of bank performance, VECM
Abstract
This paper analyzes the impact of macroeconomic indicator (including the production index, inflation, Bank Indonesia rate, Jakarta stock index, exchange rate and the crude oil price) on the state owned banks’ performance. We apply the Vector Error Correction Model (VECM) on the banking data ranging from 2006-2013, and provide us several findings. First, the impulse response function shows the largest response of the bank overhead cost (BOPO) due to the macroeconomic shock; we argue the volatility of this bank efficiency indicator, reflects the inefficiency of the banks in Indonesian. Second, the amount of loan and the lending to deposit ratio (LDR) provide the weakest response due to the macroeconomic shock. This is in line with the result of variance decomposition, where the macroeconomic variable explains the least of the NPL variation. Third, from all macroeconomic variables we observe, the shock of Bank Indonesia’s rate generally provides the largest response of most of the bank performance indicators; which supports the use of the Bank Indonesia’s rate as effective monetary instrument.
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References
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Alfin, A., Siregar, H., dan Hasanah, H. 2015. Faktor-faktor yang Mempengaruhi Efisiensi Biaya Perbankan di Kawasan ASEAN-5. Monograf, Departemen Ilmu Ekonomi, Fakultas Ekonomi
dan Manajemen, IPB. Bogor.
Ali, K., Akhtar, M.F., dan Ahmed, H.Z. 2011. Bank-Specific and Macroeconomic Indicators of Profiability – Empirical Evidence from The Commercial Banks of Pakistan. International Journal of Business and Social Science. Vol.2, No. 6, pp. 235-242.
Alper, D. dan Anbar, A. 2011. Bank Specific and Macroeconomic Determinants of Commercial Bank Profitability: Empirical Evidence from Turkey. Business and Economics Research Journal, Vol. 2, pp. 139-152.
Athanasoglou, P.P., Brissimis, S.N., dan Delis, M.D. 2005. Bank-specific, Industry-Specific and Macroeconomic Determinants of Bank Profitability. Bank of Greece Working Paper No. 25.pp.4-35.
Awojobi, O. dan Amel. 2011. Analyzing Risk Management in Banks: Evidence of Bank Efficiency and Macroeconomic Impact. Journal of Money, Investment and Banking, Vol.22, pp. 147-162.
Bank Indonesia. 2011. Peraturan Bank Indonesia Nomor 13/1/PBI/2011 tentang Penilaian Tingkat Kesehatan Bank Umum. Bank Indonesia, Jakarta.
Blancard, O.J. dan Fischer, S. 1998. Lectures on Macroeconomics. Cambridge, MA and London. The MIT Press.
Bonin, J.P., Hasan, I., dan Wachtel, P. 2003. Bank Performance, Efficiency, and Ownership in Transition Countries. Makalah yang diseminarkan pada The Ninth Dubrovnik Economic Conference, Dubrovnik, 26-28 June.
Calomiris, C., Orphanides, A., dan Sharpe, S. 1997. Leverage as a State Variable for Employment, Inventory Accumulation and Fixed Investment dalam F Capie and G Woods (editor), Asset Prices and The Real Economy, Macmillan Press, London.
Clair, R.S.T. 2004. Macroeconomic Determinants of Banking Financial Performance and Resilience in Singapore. MAS Staff Paper, No. 38. Monetary Authority of Singapore.
De Bock, R. dan Demyanets, A. 2012. Bank Assets Quality in Emerging Markets: Determinants and Spillovers. IMF Working Paper, No. 71, pp.1-26.
Enders W. 2004. Applied Econometric Time Series. Alabama : University of Alabama.
[FEM]. Fakultas Ekonomi dan Manajemen. 2012. Perkembangan Makroekonomi dan Keuangan serta Implikasinya terhadap Bisnis BRI. Institut Pertanian Bogor.
Festic, M. dan Beko, J. 2008. The Banking Sector and Macroeconomic Performance in Central European Economies. Czech Jornal of Economics and Finance. No. 58, Vol. 3-4, pp. 131-151.
Gerlach, S., Peng, W., dan Shu, C. 2005. Macroeconomic Conditions and Banking Performance in Hong Kong SAR: A Panel Data Study. BIS paper, No.22, Monetary and Economic Department, Bank for International Settlements, Swiss.
Ghazali, M.B. 2008. The Bank-Specific and Macroeconomic Determinants of Islamic Bank Profitability: Some International Evidence. Thesis. Faculty of Business and Accountancy, University of Malaya.
Gizycki, M. 2001. The Effect of Macroeconomic Condition on Banks Risk and Profitability. Research Discussion Paper, No. 06, System Stability Department, Reserve Bank of Australia.
Guerrieri, L. dan Welch, M. 2012. Can Macro Variables Used in Stress Testing Forecast the Performance of Banks?. Finance and Economics Discussion Series, No 49, Divisions of Research & Statistics and Monetary Affairs, Federal Reserve Board.
Hamadi, H. dan Awdeh, A. 2012. The Determinants of Bank Net Interest Margin: Evidence from the Lebanese Banking Sector. Journal of Money, Investment and Banking, Vol.23, pp. 85-98.
Kaufman. G. 1998. Central Banks, Asset Bubbles, and Financial Stability. Federal Reserve Bank of Chicago Working Paper, WP98/12.
Lowe, P. dan Rohling, T. 1993. Agency Costs, Balance Sheets, and The Business Cycle. Reserve Bank of Australia Discussion Paper No. 9331.
Mishkin FS. 2001. The Economics of Money, Banking, and Financial Markets. New York : Columbia University.
Mirzaei, A., Liu, G. dan Moore, T. 2011. Does Market Structure Matter on Banks’ Profitability and Stability? Emerging versus Advanced Economies. Economics and Finance Working Paper, No. 11-12. Pp. 1-40.
Naceur, S.B. 2003. The Determinants of The Tunisian Banking Industry Profitability: Panel Evidence. Department of Finance, Université Libre de Tunis.
Pasiouras, F. and Kosmidou, K. 2007. Factors influencing the profitability of domestic and foreign commercial bnaks in the European Union, International Business and Finance, No. 21, 222-237.
Rumler, F. dan Waschiczek, W. 2010. The Impact of Economic Factors on Bank Profits. Monetary Policy and The Economy Q4, pp. 49-67.
Saad, W. dan El-Moussawi, C. 2012. The Determinants of Net Interest Margins of Commercial Banks in Lebanon. Journal of Money, Investment and Banking, Vol.23, pp. 118-132.
Sastrosuwito, S. dan Suzuki Y. 2011. Post Crisis Indonesian Banking System Profitability: Bank- Specific, Industry-Specific, and Macroeconomic Determinants. Makalah yang diseminarkan
pada The 2nd International Research Symposium in Service Management, Yogyakarta, INDONESIA, 26 – 30 July.
Shaher, T.A., Kasawneh, O. dan Salem, R. 2011. The Major Factors that Affect Banks’ Performance in Middle Eastern Countries. Journal of Money, Investment and Banking, Vol. 20, pp. 101-109.
Published
2015-10-07
How to Cite
Aviliani, A., Siregar, H., Maulana, T., & Hasanah, H. (2015). The Impact of Macroeconomic Condition on The Banks Performance in Indonesia. Buletin Ekonomi Moneter Dan Perbankan, 17(4), 379-402. https://doi.org/10.21098/bemp.v17i4.503
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Buletin Ekonomi Moneter dan Perbankan / Bulletin of Monetary Economics and Banking is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
