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

Viphindrartin, Sebastiana, Ardhanari, Margaretha, Wilantari, Regina Niken, Somaji, Rafael Purtomo and Arianti, Selvi (2021) Effects of Bank Macroeconomic Indicators on the Stability of the Financial System in Indonesia. Effects of Bank Macroeconomic Indicators on the Stability of the Financial System in Indonesia, 8 (1). pp. 647-654. ISSN pISSN: 2288-4637 eISSN: 2288-4645

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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.

Item Type:	Article
Uncontrolled Keywords:	Financial Economics, Rural Bank, Non Performing Loans, Vector Error Correction Model, Indonesia
Subjects:	Business > Management
Divisions:	Journal Publication
Depositing User:	F.X. Hadi
Date Deposited:	02 Nov 2023 03:06
Last Modified:	16 Jan 2024 01:53
URI:	http://repository.ukwms.ac.id/id/eprint/37212

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