Is there financial accelerator in indonesian banking?

Dadang Lesmana, Felisitas Defung, Wirasmi Wardhani

Abstract


The purpose of this study is to examine the effect of the business cycle on price-cost margins in Indonesian banking. The research method used is the System Generalized Method Moment (SYS-GMM) to analyze 94 conventional banks in Indonesia for the period 2011-2020. The results of this study indicate that the business cycle has two effects on the price-cost margin in Indonesian banking. First, GDP has no effect on the price-cost margin. Second, credit has a negative effect on price-cost margins in Indonesian banks. Our result study is to prove the results of research on "financial accelerators" in previous studies. This study suggests banks and policymakers in Indonesia must be able to assist the economy in providing credit to accelerate economic recovery, which can reduce the default risk.


Keywords


Business Cycle; Price-cost Margin; Financial Accelerator; Banking

Full Text:

PDF

References


Adelopo, I., Lloydking, R., & Tauringana, V. (2017). Determinants of bank profitability before, during and after the financial crisis. International Journal of Managerial Finance, 14(4). https://doi.org/10.1108/IJMF-07-2017-0148

Ali, M., & Puah, C. (2018). The internal determinants of bank profitability and stability: An insight from banking sector of Pakistan. Management Research Review, 42(2). http://dx.doi.org/10.1108/MRR-04-2017-0103.

Aliaga-Díaz, R., & Olivero, M. P. (2010). Is there a financial accelerator in US banking?: Evidence from the cyclicality of banks' price–cost margins. Economics Letters, 108(2), 167–171. https://doi.org/10.1016/J.ECONLET.2010.04.037

Altunbas, Y., Tommaso, C., & Thornton, J. (2016). Is there a financial accelerator in European banking?. Elsevier Inc,. Finance Research Letters, 7(5), 1–4. https://doi.org/10.1016/j.frl.2016.03.020

Bank Indonesia dalam LPPI. (2020). Bab Iii Stimulus Kebijakan Bank Indonesia.

Beck, T. (2013). Islamic vs. conventional banking: Business model, efficiency and stability. Journal of Banking & Finance, 37(2), 433–447. https://doi.org/10.1016/j.jbankfin.2012.09.016

Blundell, R., & Bond, S. (1998). Initial Conditions and Moment Restrictions in Dynamic Panel Data Models. Journal of Econometrics, 8(7), 115-143.

Cao, J. (2022). THE ECONOMICS OF BANKING. Routledge.

Christianti, A. (2019). Probability of default as the early warning system for the Indonesian banking sector. Jurnal Keuangan Dan Perbankan, 23(2), 283–299. https://doi.org/10.26905/jkdp.v23i2.2856

Khan, H. H., Ahmad, R. B., & Chan, S. G. (2018). Market structure, bank conduct and bank performance: Evidence from ASEAN. Journal of Policy Modeling, 40(5), 934–958. https://doi.org/10.1016/j.jpolmod.2018.02.001

Lesmana, D. (2021). Funding Risk and Bank Stability : Evidence in Indonesia Banking. 2015(2018), 142–152.

Mankiw, N. G. (2019). Macroeconomis. In Worth Publishers. Worth Publisher.

Risfandy, T., Tarazi, A., & Trinugroho, I. (2020). Competition in dual markets: Implications for banking system stability. Global Finance Journal. https://doi.org/10.1016/j.gfj.2020.100579

Santoso, W., Yusgiantoro, I., Soedarmono, W., & Prasetyantoko, A. (2020). The bright side of market power in Asian banking: Implications of bank capitalization and financial freedom. Research in International Business and Finance, 56(November 2020), 101358. https://doi.org/10.1016/j.ribaf.2020.101358

Shaban, M., & James, G. A. (2018). The effects of ownership change on bank performance and risk exposure: Evidence from indonesia. Journal of Banking and Finance, 88, 483–497. https://doi.org/10.1016/j.jbankfin.2017.02.002

Turgutlu, E. (2010). Cyclical behavior of price-cost margins in the Turkish banking industry. Economic Modelling, 27(1), 368–374.

Wang, C., & Lin, Y. (2021). Income diversification and bank risk in Asia Pacific. North American Journal of Economics and Finance, 57(March), 101448. https://doi.org/10.1016/j.najef.2021.101448

Yudaruddin, R. (2017a). Economic conditions and lending Behavior; Evidence from the regional development banks in Indonesia. International Journal of Economic Research, 14(13), 105–114.

Yudaruddin, R. (2017b). The Global Economic Crisis and Its Impact on Bank Lending in Indonesia. Jurnal Keuangan Dan Perbankan, 21(4), 621–629. https://doi.org/10.26905/jkdp.v21i4.1513

Yudaruddin, R. (2017c). The impact of economic conditions on bank profitability of regional development bank in Indonesia. International Journal of Applied Business and Economic Research, 15(19), 1–12.

Yusgiantoro, I., Soedarmono, W., & Tarazi, A. (2019). Bank consolidation and financial stability in Indonesia. International Economics, 5(8), 94–104.




DOI: https://doi.org/10.26905/jkdp.v26i3.7556

Refbacks

  • There are currently no refbacks.




Jurnal Keuangan dan Perbankan (Journal of Finance and Banking)

Diploma Program of Banking and Finance, Faculty of Economics and Business, University of Merdeka Malang

Published by University of Merdeka Malang

Mailing Address:
2nd floor Finance and Banking Building, Jl. Terusan Raya Dieng No. 57 Malang, East Java, Indonesia
Phone: +62 81 2332-1664
Email: [email protected]

This work is licensed under a Creative
Commons Attribution-ShareAlike 4.0