THE RESPONSE OF DEPOSITS IN THE BANKING SYSTEM TO SHOCKS IN THE MACROECONOMY
Abstract
This study aims at determining the response of deposits (third party funds) in the commercial banks and rural banks to the shocks occurring to inflation, money supply, and USD/IDR exchange rate. So far previous study has mainly focused on only Islamic banks. The data collected were monthly data extending from January 2015 until December 2023. All the data were available on Bank Indonesia and OJK’s websites. The research method used was impulse response function (IRF) that was preceded by vector error correction model (VECM). Upon first examination, it was found out that the data were not stationary. Therefore, they need to be first-differenced for further testing. There was cointegration in the data and therefore we could conclude that banks deposit has a long-term relationship with inflation, money supply, and exchange rate. Impulse response function showed that deposits in the banking system will decrease whenever there is a shock on inflation. This shows how people in the rural and urban areas will hold more cash in the midst of high uncertainty in the economy. Moreover, when there are shocks happening to money supply and exchange rate, the deposits in the rural and commercial banks are very likely to decline. Again, this corroborates the evidence for the tendency of the population to hold more cash in hands to be prepared in times of high uncertainty in money supply and exchange rate.
Keywords
Full Text:
PDFReferences
Adao, L. F., Silveira, D., Ely, R. A., & Cajueiro, D. O. (2022). The Impacts of Interest Rates on Bank's loan portfolio risk-taking. Journal of Economic Dynamics and Control, 144. doi:https://doi.org/10.1016/j.jedc.2022.104521
Angori, G., Aristei, D., & Gallo, M. (2019). Determinants of Banks' Net Interest Margin: Evidence from the Euro Area During the Crisi and Post-Crisis Period. Sustainability, 11(14). doi:https://doi.org/10.3390/su11143785
Anis, M., & Hamdi, B. (2022). Liquidity Risk in Economic Uncertainty: Evidence from Indonesian Islamic Banks. Jurnal Ekonomi dan Keuangan Islam, 8(1), 32-46. doi:https://doi.org/10.20885/JEKI.vol8.iss1.art3
Arintoko, A., & Kadarwati, N. (2022). Does Monetary Policy Respond to Macroeconomic Shocks? Evidence from Indonesia. Jurnal Ekonomi & Studi Pembangunan, 23(2), 171-188. doi:https://journal.umy.ac.id/index.php/esp/article/view/14881
Burhanudin, B. (2022). Examining the Effect of Service Value and Reputation on Customer Loyalty with Trust and Electronic Word of Mouth as Mediation. JAM: Jurnal Aplikasi Manajemen, 20(3), 514-527. doi: http://dx.doi.org/10.21776/ub.jam.2022.020.03.05
Chandra, J. L., & Maretha, E. L. (2024). The Effect of Credit Risk, Liquidity Risk, and Bank Capital on Bank Profitability During the COVID-19. Journal of Management and Business Environment, 5(2), 183-196. doi:http://dx.doi.org/10.24167/jmbe.v5i2.10204
Duong, K. D., Le, H. V., & Le, A. N. (2023). Do Bank Funding Diversity and Bank Lending Affect Net Interest Margins? Evidence from Asia Markets Before and During the COVID-19 Pandemic. SAGE Open, 13(4). doi:https://doi.org/10.1177/21582440231214044
Ekadjaja, M., Siswanto, H. P., A, E., & Rorlen, R. (2020). The Effects of Capital Adequacy, Credit Risk, and Liquidity Risk on Banks' Financial Distress in Indonesia. The 9th International Conference on Enterpreneurship and Business Management (ICEBM 2020) (pp. 393-399). Jakarta: Atlantic Press B. V.
Febiyanni, F., & Hermanto, H. (2023). The Influence of Capital Risk, Liquidity Risk, and Credit Risk on Profitability with Macroprudential Intermediation Ratio as a Moderating Variable. Enrichment: Journal of Management, 13(3), 1984-1992. doi:10.35335/enrichment.v13i3.1397
Fungacova, Z., Kerola, E., & Weill, L. (2022). Does Experience of Banking Crises Affect Trust in Banks. Journal of Financial Services Research, 62, 61-90. doi:doi.org/10.1007/s10693-021-00365-w
Hac, L. D. (2021). Bank Concentration and Banking Stability: Evidence from EAGLE Group. JAM: Jurnal Aplikasi Manajemen, 19(4), 703-714. doi:dx.doi.org/10.21776/ub.jam.2021.019.04.01
Handayani, F. A., & Kacaribu, F. (2021). Asymmetric Transmission of Monetary Policy to Interest Rates: Empirical Evidence from Indonesia. Bulletin of Monetary Economics and Banking, 24(1), 119-150. doi:https://doi.org/10.21098/bemp.v24i1.1201
Irawan, I., Kusuma, R. D., & Irawan, K. C. (2021). Commercial Bank Stimulus on Economic Growth and Labour Absorption in Indonesia. Journal of Economic Education, 10(2), 142-148. doi:https://doi.org/10.15294/jeec.v10i2.52207
Kuncoro, M. T., & Ashsifa, I. (2023). How Does Economic Uncertainty Impact the Banking Sector Performance? Evidence from ASEAN. AKUNTABILITAS, 17(2), 275-292. doi:https://doi.org/10.29259/ja.v17i2.22383
Maulayati, R. R., Bahril, M. A., Najiatun, N., & Herianingrum, S. (2020). Effect of Macroeconomic Variables on Third-Party Funds in Islamic Commercial Banks in Indonesia. Journal of Islamic Economics Lariba, 6(1), 19-40. doi:10.20885/jielariba.vol6.iss1.art2
Mentari, R. N., B, H., & A. G., E. Y. (2019). Effectiveness of Monetary Policy Transmission Mechanism in Indonesia. JEJAK: Jurnal Ekonomi dan Kebijakan, 11(1), 189-206. doi:https://doi.org/10.15294/jejak
Nguyen, P. T. (2022). The Impact of Banking Sector Development on Economic Growth: The Case of Vietnam's Transitional Economy. Journal of Risk and Financial Management, 15(8). doi:https://doi.org/10.3390/jrfm15080358
Nguyen, Y., & L, N. (2022). Funding Liquidity, Bank Capital, and Lending Growth in a Developing Country. Cogent Economics & Finance, 10. doi:doi.org/10.1080/23322039.2022.2122958
Nikolaj, S. S., Drazenovic, B. O., & Buterin, V. (2022). Deposit Insurance, Banking Stability, and Banking Indicators. Economic Research-Ekonomska Istrazivanja, 35(1). doi:https://doi.org/10.1080/1331677X.2022.2033130
Ozili, P. K. (2023). Impact of Monetary Policy on Financial Inclusion in Emerging Markets. Journal of Risk and Financial Management, 16(7). doi:https://www.mdpi.com/1911-8074/16/7/303#
Rathnayake, D. N., Yang, B., Louembe, P. A., & Li, Q. (2022). Interest Rate Liberalization and Commercial Bank Performance: New Evidence from Chinese A-Share Banks. SAGE Open, 1-12. doi:10.1177/21582440221096648
Saleh, I., & Afifa, M. A. (2020). The Effect of Credit Risk, Liquidity Risk and Bank Capital on Bank Profitability: Evidence from an Emerging Market. Cogent Economics & Finance, 8(1). doi:https://doi.org/10.1080/23322039.2020.1814509
Segev, N., Ribon, S., Kahn, M., & De Haan, J. (2022). Low Interest Rates and Banks' Interest Margins: Does Deposit Market Concentration Matter? Journal of Financial Services Research. doi:https://doi.org/10.1007/s10693-022-00393-0
Shahriar, A., Mehzabin, S., Ahmed, Z., S, D. E., & K, A. M. (2023). Bank Stability, Performance, and Efficiency: An Experience from West Asian Countries. IIM Ranchi Journal of Management Studies, 2(1), 31-47. doi:https://doi.org/10.1108/IRJMS-02-2022-0017
Soehaditama, J. P. (2023). Sustainability in Bank: Deposits, Investment, and Interest Rate. Formosa Journal of Sustainable Research (FJSR), 2(5), 1069-1078. doi:https://doi.org/10.55927/fjsr.v2i5.3912
Zeqiraj, V., Hammoudeh, S., Iskenderoglu, O., & Tiwari, A. K. (2020). Banking Sector Performance and Economic Growth: Evidence from Southeast European Countries. Post-Communist Economies, 32(2), 267-284. doi:https://doi.org/10.1080/14631377.2019.1640988
Refbacks
- There are currently no refbacks.
Copyright (c) 2024 Veliana Theola, Regi Muzio Ponziani
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Fakultas Ekonomi dan Bisnis | Universitas Pelita Harapan | Kampus Universitas Pelita Harapan | Gedung F Lt. 12 | Lippo Karawaci, Tangerang - 15811 | Telp 021-5460901 | Fax 54210992