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.
Middle-income trap (MIT) refers to a condition in which the middle-income countries are not able to follow the trajectory of an economic growth to achieve a new level as high-income countries. Using descriptive analysis, more than 30 countries are found to experience MIT including China and India. Some of countries in Africa are even experiencing low-income trap. Between 1970 and 2011 Indonesia was actually in a transition condition of low-income to middle-income economy. Indonesia has begun to face constraints that would inhibit the sustained growth, particularly on the supply side of the economy. It is better to do the anticipatory actions that can strengthen the economy's fundamentals in order to avoid MIT. The estimated regression model used in this study indicates that the increase in current national income is affected by the previous national income and the share of gross fixed capital formation to GDP. So, to avoid MIT, the government of Indonesia should prioritize on investment for developing growth centers as well as for improving human resources and technology application.
The cotemporary dual monetary system is characterized by an interest system in conventional system and the profit-and-loss sharing (PLS) system in Islamic system, where each of them has a different behavior in influencing the money demand and the monetary stability. This study analyses the components of money demand under both the conventional and Islamic financial system in Indonesia, using a Vector Auto Regression (VAR) and Vector Error Correction Model (VECM) methods.The results show that in Islamic system, PLS return negatively correlated with all Islamic demand for money components (currency, Wadiah demand deposit, Mudharabah saving deposit, and Mudharabah time deposit). While in conventional system, interest is negatively correlated with the demand for currency, the demand deposit, and the saving deposit, but positively correlated with the demand for time deposit. The Islamic demand for money stabilizes quiclier to respons the shock from other variables compare to conventional system. Moreover, the interest rate contributes 20%-29% in the conventional demand for money variation, while in PLS system the return almost has no role on Islamic money demand variation. Our research also shows that the savings deposits in Indonesia have the characteristics of the demand deposits, hence preferably included in M1 instead of in M2.These findings suggest the monetary authority to gradually shift their mindset from the conventional monetary operation to the dual monetary operation and explore further the possibility of using PLS return as the “policy rate” benchmark to achieve the principal objectives in maximizing distributive social welfare and justice, as well as minimizing inefficiency.JEL Classification: C32, E31, E41, E52Keywords: Permintaan Uang Konvensional, Permintaan Uang Islam, Sistem Keuangan/Perbankan Ganda, VAR/VECM
Micro and small industry sector plays an important role in the economy of a country including Indonesia, due to its large contribution to gross domestic product and its large labor absorption. The output of the sector is influenced by economic variables and non-economic factors such as the El Nino climate phenomenon. The purpose of this study is to analyze the impact of these economic factors and the climate phenomenon on the output of micro and small industries in Java by using panel data, which are combination of cross section and time series, i.e. 6 provinces of Java from 2011 to 2017. The results showed that these economic factors have positive effect on the output while El Nino has negative effect. In accordance with these results, the government needs to actively facilitate micro and small industries in the fulfillment of economic factors and assist the business actors in anticipating and mitigating the impact of El Nino.Abstrak: Sektor industri mikro dan kecil memegang peranan penting dalam perekonomian Indonesia, karena kontribusinya yang besar terhadap produk domestik bruto dan serapan tenaga kerja. Output sektor tersebut dipengaruhi oleh faktor ekonomi dan faktor nonekonomi termasuk fenomena iklim El Nino. Tujuan penelitian ini adalah menganalisis pengaruh faktor ekonomi dan fenomena iklim tersebut terhadap output industri mikro dan kecil yang berlokasi khususnya di Pulau Jawa dengan menggunakan panel data. Data yang digunakan merupakan gabungan cross section (6 provinsi di Pulau Jawa) dan time series (tahun 2011-2017). Hasil penelitian menunjukkan bahwa faktor ekonomi berpengaruh positif terhadap produksi industri mikro dan kecil, sedangkan El Nino berpengaruh negatif. Terkait hal ini pemerintah perlu aktif memfasilitasi industri mikro dan kecil dalam pemenuhan/akses terhadap faktor-faktor ekonomi, serta membantu pelaku usaha industri mikro dan kecil dalam mengantisipasi dan memitigasi dampak El Nino.Kata kunci: El Nino, metode data panel, faktor ekonomi, industri mikro dan kecil
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