Tag Archives: Panel Data

The Influence of Macroeconomic Factors on Indonesian Banking Performance (In Buku 3 and Buku 4 of 2012-2017 Period) (Published)

Banks should have adequate capacity, especially in holding capital, to be able to manage risks. In its development, the requirements of capital’s components and instruments as well as the calculation of bank capital adequacy need to be adjusted to the international standard. Strong capital will make banks healthier and more competitive in the face of the competition from major banks in the ASEAN region and globally. Therefore, the Financial Services Authority (OJK) issued a number of regulations so that the national banking industry is stronger and more trustworthy by the public. The rule is the OJK Regulation (POJK) Number 6/POJK.03/2016 concerning Business Activities and Office Networks Based on the Core Capital. In 2012, the dynamics of the global economy set a negative trend and began to have an impact on the Asian economies, such as Indonesia. In this study, the focus was on the improvement in banking risk indicators that occurred to evaluate the performance of banks by using CAR, ROA, NIM, LDR and NPL variables, and analyze macroeconomic factors such as inflation, interest rates, exchange rates, and GDP. This study aims to describe the performance of banking in Bank Umum Kegiatan Usaha 3 and 4 (BUKU 3 and BUKU 4) consist of NIM, NPL, CAR, ROA, and LDR and analyze the response of macroeconomic variables to banking performance in banks in BUKU 3 and BUKU 4. The method used was the VECM estimation model that was then analyzed with the Impulse Response Function (IRF) and Forecast Error Decomposition of Variance (FEVD). The results of the research on banking performance, if it was grouped based on bank business activities in BUKU 3 and BUKU 4, showed that overall bank performance in BUKU 4 was better than which was in BUKU 3. The result of bank IRF and FEVD in BUKU 3 was that the macroeconomic variable that provide the greatest response and contribution was interest rates. While the result of bank IRF and FEVD in BUKU 4 was that the macroeconomic variable that gave the biggest response and contribution was inflation.

Keywords: Indonesia Banking Performance, Macroeconomic, Panel Data, VECM

The Effect of Regional Integration on Private Investment in East African Community (Published)

Using annual data from 1980-2014, this paper employs a random effect model to estimate the effect of regional integration on private investment in East African Community (EAC). Levin-Lin-Chu Test (LLC) and Pedroni Cointegration Test were used to investigate the properties of data with respect to unit root and cointegration respectively while the Hausman Test was used to select the random model. The error correction model was used to capture the short-run dynamics in the model. The findings suggest that regional integration (proxied by intra-EAC openness), has a positive significant effect on private investment in the EAC. Hence the respective EAC governments should sustain policies that promote free trade so as to boost private investment in the region through the removal  of tariffs which leads to efficiency in production and hence economies of scale.

Keywords: East African Community, Error Correction Model, Panel Data, Private investment, Regional Integration

The Analysis of the Credit Spread Bonds for Banking Sub-Sector Effect in 2014 – 2016 (Published)

The credit spreads are the interpretation of the bond returns received by investors as measured by the difference between the corporate bonds yield rate and government bonds. The purpose of this study is to analyze the impact of changes in macroeconomic variables. Such as volatility of stock returns, default probability and inflation on banking sub-sector credit spread bonds. This study analyzes the change of credit spreads bonds based on the category of the grades, the investment grade and non-investment grade. The data were analyzed using panel data which consist of several companies with investment grade and non-investment grade categories during 2014 – 2016. The result showed that the relationship of default probability and inflation variables had significant effect in the credit spreads of investment grade bonds, while the variable volatility of stock return had no significant effect. While significant effect was found inthe non-investment grade bonds, the variable volatility of stock returns, default probability and inflation.

Keywords: Credit Spreads, Default Probability, Inflation, Panel Data, Volatility of Stock Returns

AN EMPIRICAL DETERMINATION OF FOREIGN DIRECT INVESTMENT IN WEST AFRICA COUNTRIES: A PANEL DATA ANALYSIS (Published)

Most countries in Africa have undertaken significant steps to attract FDI by adopted FDI-specific regulatory frameworks to support their investment related objectives. Thus, this study investigates the determinants of FDI in sixteen countries in West African by empirically examining the influence of growth rate of GDP in all the sixteen countries; GDP per capita; government policy in attracting foreign investors; infrastructural development; openness of the economy to trade; inflation rate; natural resources, official exchange rate and labour availability. Panel data were used because of its advantage over OLS and because it is better use in cross-country regressions. An important implication of the empirical result is that FDI in West Africa is mainly affected by natural resources and labour availability, GDP per capita which is used as a proxy for capital-labour endowment, Market size of the countries proxy by GDP growth rate and official exchange rate. The rule of thumb regarding the issue of FDI in West Africa sub-region suggests that the sub-region can be the top receipt in Africa in the next decade if other countries discover resources available in their countries

Keywords: Eclectic Paradigm, FDI inflows, Panel Data, West Africa countries