DYNAMIC RELATIONS BETWEEN MACROECONOMIC VARIABLES AND THE BANK PERFORMANCE IN INDONESIA: AN APPLICATION OF VECTOR ERROR CORRECTION MODEL
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Date
2019
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Volume Title
Publisher
Journal of Advanced Research in Dynamical & Control Systems, Vol. 11, 03-Special Issue
Abstract
The purpose of this study is to analyze how the effects of fluctuations in macroeconomic variables are that measured by economic growth, inflation rates, exchange rates and interest rates on the performance of conventional banks in Indonesia as measured by ROA, NIM, NPL, BOPO, LDR. The method used in this study is Error Correction Model (VECM) to see the response of banking performance to the presence of macro variable shocks in the long and short term, the data used is the time series data from 2000 to 2016.The results showed that based on Impulse Response Function (IRF) analysis conventional banking performance has a short-term shock to fluctuations in macroeconomic variables while based on the Variance Decomposition Model (VD), in the long-term banking performance has little effect on fluctuations in macroeconomic variables.
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Keywords
Macroeconomic Variables, Bank Performance, VECM