Browse > Article
http://dx.doi.org/10.13106/jafeb.2021.vol8.no1.647

Effects of Bank Macroeconomic Indicators on the Stability of the Financial System in Indonesia  

VIPHINDRARTIN, Sebastiana (Economics Department, Faculty of Economics and Business, University of Jember)
ARDHANARI, Margaretha (Management Department, Faculty of Business, Widya Mandala Catholic University Surabaya)
WILANTARI, Regina Niken (Economics Department, Faculty of Economics and Business, University of Jember)
SOMAJI, Rafael Purtomo (Economics Department, Faculty of Economics and Business, University of Jember)
ARIANTI, Selvi (Economics Department, Faculty of Economics and Business, University of Jember)
Publication Information
The Journal of Asian Finance, Economics and Business / v.8, no.1, 2021 , pp. 647-654 More about this Journal
Abstract
This study examines the non-performing loans of rural banks and macroeconomic factors in Indonesia, including inflation, exchange rates, and interest rates. Theoretically, the existence of erratic macroeconomic conditions can affect the level of non-performing credit risk in rural credit banks in Indonesia. The effect of macroeconomic conditions on non-performing loans has a different response for each economic sector. The main objective of this study is to determine the effect of macroeconomic factors (inflation, exchange rates, and interest rates) and bank-specific factors (credit) on the Non-Performing Loans (NPL) of Rural Banks in Indonesia for the period from January 2015 to December 2018. This study uses a Vector Error Correction Model (VECM) estimation to determine the effect of independent variables consisting of macroeconomic factors and bank-specific factors. Based on the estimation results of the Vector Error Correction Model, three variables that have a positive and significant effect on long-term non-performing loans are credit, inflation, and interest rates. Meanwhile, in the short term, there are only two variables that have a positive and significant effect on non-performing loans, namely, credit and interest rates. Inflation and exchange rate variables have a negative and insignificant effect on bad credit in the short term.
Keywords
Financial Economics; Rural Bank; Non Performing Loans; Vector Error Correction Model; Indonesia;
Citations & Related Records
Times Cited By KSCI : 1  (Citation Analysis)
연도 인용수 순위
1 ADB Institute. (2015) Financial System Stability, Regulation, and Financial Inclusion. Cham, Switzerland: Springer
2 Bofondi, M., & Ropele, T. (2011). Macroeconomic Determinants of Bad Loan: Evidence from Italian Bank. Questional Papers Economia e Finanza, 3(89), 5-22. https://EconPapers.repec.org/RePEc:bdi:opques:qef_89_11
3 Bekhet, H., & Matar, A. (2013). The influence of global financial crisis on the Jordanian equity market: VECM approach. International Journal of Monetary Economics and Finance, 6(4), 285-301. DOI: 10.1504/IJMEF.2013.059946   DOI
4 Bellotti, A., Brigo, D., Gambetti, P., & Vrins, F. (2020). Forecasting recovery rates on non-performing loans with machine learning. International Journal of Forecasting, 37(1), 428-444. https://doi.org/10.1016/j.ijforecast.2020.06.009   DOI
5 Betz, J., Kruger, S., Kellner, R., & Rosch, D. (2020). Macroeconomic effects and frailties in the resolution of non-performing loans. Journal of Banking & Finance, 112(3), 105-212. https://doi.org/10.1016/j.jbankfin.2017.09.008   DOI
6 Cammarosano, J. R. (2016). A Wider View of John Maynard Keynes: Beyond the General Theory of Employment. Lanham, MD: Lexington Books
7 Cornock, O. (2018). The Report: Indonesia 2018. Oxford, UK: Oxford Business Group
8 Dombret, A. R., & Lucius, O. (2013). Stability of the Financial System: Illusion Or Feasible Concept?. Cheltenham, UK: Edward Elgar
9 Flavin, T. J., & Sheenan, L. (2015). The role of U.S. subprime mortgage-backed assets in propagating the crisis: Contagion or interdependence? The North American Journal of Economics and Finance, 34(11), 167-186. https://doi.org/10.1016/j.najef.2015.09.001   DOI
10 Fontana, G., & Setterfield, M. (2016). Macroeconomic Theory and Macroeconomic Pedagogy. Cham, Switzerland: Springer
11 Green, R. (2016). Classical Theories of Money, Output and Inflation. Cham, Switzerland: Springer
12 Joe, D. Y., & Oh, F. D. (2018). Credit ratings and corporate cash holdings: Evidence from Korea's corporate reform after the 1997 Asian financial crisis. Japan and the World Economy, 45(3), 9-18. https://doi.org/10.1016/j.japwor.2017.11.003   DOI
13 Jovica, S., Miladinovi, J. S., Micic, R., Markovic, S., & Rakic, G. (2019). Analysis of exchange rate and gross domestic product (GDP) by adaptive neuro fuzzy inference system (ANFIS). Philica A: Statistical Mechanics and its Applications, 513, 333-338. https://doi.org/10.1016/j.physa.2018.09.009   DOI
14 Keddad, B., & Schalck, C. (2020). Evaluating sovereign risk spillovers on domestic banks during the European debt crisis. Economic Modeling. 88, 356-375. https://doi.org/10.1016/j.econmod.2019.09.047   DOI
15 Lehner, O. M. (2016). Routledge Handbook of Social and Sustainable Finance. London, UK: Routledge
16 Levendis, J. D. (2019). Time Series Econometrics: Learning Through Replication. Cham, Switzerland: Springer.
17 Margono, H., Wardani, M. K., & Safitri, J. (2020). Roles of Capital Adequacy and Liquidity to Improve Banking Performance. Journal of Asian Finance, Economics andBusiness, 7(11), 75-81. https://doi.org/10.13106/jafeb.2020.vol7.no11.075   DOI
18 Linda, M. R., Megawati, & Deflinawati. (2015). The Influence of Inflation, Exchange Rates and Interest Rates on Non-Performing Loans at PT. State Savings Bank (Persero) Tbk, Padang Branch. Journal of Economic Education,137-144.
19 Mago, S. (2014). Microfinance and Poverty Alleviation: An Empirical Reflection. Journal of Asian Finance, Economics and Business, 1(2), 5-13. https://doi.org/10.13106/jafeb.2014.vol1.no2.5.   DOI
20 Mankiw, N. G. (2013). Principle of macroeconomics. Singapore: Cengage Learning
21 Oberfield, E. (2013). Productivity and misallocation during a crisis: Evidence from the Chilean crisis of 1982. Review of Economic Dynamics, 16(1), 100-119. https://doi.org/10.1016/j.red.2012.10.005   DOI
22 Rachman, R. A., Kadarusman, Y. B, Anggriono, K, & Setiadi, R. (2018). Bank-specific Factors Affecting Non-performing Loans in Developing Countries: Case Study of Indonesia. Journal of Asian Finance, Economics and Business, 5(2), 35-42. https://doi.org/10.13106/jafeb.2018.vol5.no2.35   DOI
23 Ramlall, I. (2018). Understanding Financial Stability. Bingley, UK: Emerald
24 Scardovi, C. (2015). Holistic Active Management of Non-Performing Loans. Cham, Switzerland: Springer
25 Schmidt, R. H., Seibel, H. D., & Thomes, P. (2016). From Microfinance to Inclusive Finance: Why Local Banking Works.Hoboken, NJ: John Willey and Sons
26 Schweiger, C. (2014). The EU and the Global Financial Crisis. Heltenham, UK: Edward Elgar
27 Zheng, Z., Mishra, T., & Yang, Y. (2020). Inflation and income inequality in a variety-expansion growth model with menu costs. Economics Letters, 194, 109-373. https://doi.org/10.1016/j.econlet.2020.109373   DOI
28 Sosa, M., & Ortiz, E. (2015). Exchange rate disequilibria integration and crisis: Canada, Mexico, Japan and United Kingdom vs EE.UU. dollar (1994-2014). Contaduria y Administracion, 60, 106-127. https://doi.org/10.1016/j.cya.2015.08.014   DOI
29 Sigh, K., & Sudana, S. (2017). Determinants of Non-Performing Loan Comparativa Study of Banks in Indonesia and Nepal. Increasing Management Relevance and Competitiveness.Surabaya, Indonesia: Airlangga University
30 Vithessonthi, C. (2016). Productivity and misallocation during a crisis: Evidence from the Chilean crisis of 1982. International Review of Financial Analysis, 45, 295-305. https://doi.org/10.1016/j.irfa.2016.04.003   DOI