Tag Archives: VECM

The Impact of Money Supply on Inflation in Nigeria (1980 – 2009) (Published)

This study examined the impact of money supply on inflation in Nigeria between 1980 and 2009, using Vector Error Correction Mode (VECM). The data for the variables were sourced from CBN statistical Bulletin. The results of the test established a significant long run positive relationship between money supply and inflation in Nigeria. Based on this finding, the study recommended that, government intensify the effort to combat inflation by encouraging the monetary authority to put in place policies measures that are gear toward reducing the volume of money in circulation in Nigeria.

Keywords: Inflation, Money Supply, Nigeria, VECM

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 Determinant of Bank Credit Risk: Comparative Analysis of Conventional and Islamic Banks in Indonesia (Published)

Credit/financing is bank’s core business following with credit/financing risk. Increasing and decreasing of credit/financing risk affected by external factor such as macroeconomic variables also internal banking factor. The aim of this research is to analyse which macro (GDP, exchange rate, consumer price index, Bank Indonesia Certificates/Sharia & money supply) and micro (loan/financing to deposit ratio, capital adequacy ratio, operational efficiency ratio) variables the most affecting to credit/financing growth and credit/financing risk. This research utilized Vector Error Correction Model (VECM).  The result of this research showed Bank Indonesia Certificates and money supply as macro variables have the most influence, and CAR as internal factor has the biggest contribute to credit growth. For financing growth, macro variables that have biggest influence are exchange rate and Bank Indonesia Certificates Sharia, as for micro variable CAR has the biggest contribution. Credit risk affected by Bank Indonesia Certificates, and for micro variable, LDR has the biggest influence. For financing risk, Bank Indonesia Certificates Sharia has the biggest influence, and OER has the biggest contribution. 

Keywords: Credit Growth, Credit risk, Financing Growth, Financing Risk, VECM

CARBON EMISSION AND ECONOMIC GROWTH OF SAARC COUNTRIES: A VECTOR AUTOREGRESSIVE (VAR) ANALYSIS (Published)

This paper examines the causal relationship between carbon ( ) emissions and economic growth in seven SAARC countries using time series data for the period from 1972-2012. We applied Vector Error Correction Modeling (VECM) approach. We have also applied Augmented Dickey-Fuller (ADF) and Phillips-Perron (P.P) test and Johansen’s cointegration approach to check time series properties and cointegration relationship of the variables. Results exhibit a cointegration relationship between environmental pollution and economic growth. Results also show that the estimated coefficients of emissions have positive and significant impacts on GDP in the long run. These results will help the environmental authorities to understand the effects of economic growth on environment for degradation and manage the environmental problems using macroeconomic methods.

Keywords: Causality, Emission, GDP, SAARC, VECM

Carbon Emission and Economic Growth of SAARC Countries: A Vector Autoregressive (VAR) Analysis (Review Completed - Accepted)

This paper examines the causal relationship between carbon ( ) emissions and economic growth in seven SAARC countries using time series data for the period from 1972-2012. We applied Vector Error Correction Modeling (VECM) approach. We have also applied Augmented Dickey-Fuller (ADF) and Phillips-Perron (P.P) test and Johansen’s cointegration approach to check time series properties and cointegration relationship of the variables. Results exhibit a cointegration relationship between environmental pollution and economic growth. Results also show that the estimated coefficients of emissions have positive and significant impacts on GDP in the long run. These results will help the environmental authorities to understand the effects of economic growth on environment for degradation and manage the environmental problems using macroeconomic methods.

Keywords: Causality, Emission, GDP, SAARC, VECM