The purpose of this study is to analyze effects of the real exchange rate (RER) on the Indonesia&... more The purpose of this study is to analyze effects of the real exchange rate (RER) on the Indonesia's bilateral trade balance with its three major trading partners, namely: the US, China, and Japan, both in the short run and in the long run. This study also investigates the Marshall-Lerner Condition and the existence of the J-Curve on the Indonesia's bilateral trade balance for the period 1996:Q1 to 2011:Q4 using a Vector Error Correction Model (VECM). The study indicates that (i): in the long-run, RER has a positive impact in the long-run Indonesia's bilateral trade balance with China and Japan. On the other hand, RER has a negative impact on the Indonesia's bilateral trade balance with US; (ii) The Marshall-Lerner Condition and the J-Curve Phenomenon were only seen on the Indonesia's bilateral trade balance with China and Japan.
This research aims to measure the effectiveness of monetary policy transmission, especially throu... more This research aims to measure the effectiveness of monetary policy transmission, especially through the interest rate channel. The analysis was conducted on the first stage of its transmission, namely Interest Rate Pass-through (IRPT). IRPT refers to condition in which retail interest rate (both deposit and lending rate) responds to changes in policy rate of central bank. IRPT was measured using Error Correction Model (ECM) for time series data in the period of January 2010 - December 2015. The results of this study indicated that degree of long term and short term IRPT is incomplete for deposit and lending rate. In addition, IRPT for deposit rate is higher than lending rate, but the adjustment process of lending rate faster than deposit rate. Finally, model that include other variables (macroeconomic and internal banking indicator) generate long term IRPT which is smaller than the standard model. This results implies that the Central Bank, the FSA, and government needs to pay atten...
Indonesian Journal of Business and Entrepreneurship
Micro and small industry sector plays an important role in the economy of a country including Ind... more 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.
Banking and stock market are two financial institutions which play an important role in the econo... more Banking and stock market are two financial institutions which play an important role in the economic development process. Many studies suggest that the development of banking and stock market are able to increase the economic growth. There are factors which influence the development of these two financial institutions, for example macroeconomic stability and institutional influences such as corruption. This study aims to analyze how corruption affects the development of banking and stock market and also tries to identify the role of development of banking to reduce corruption. This study uses panel data for nine countries of ASEAN +3 region, during 2003-2012. The result shows that corruption hinders the development of banking and stock market. In addition, banking development will reduce corruption.
This paper analyzes the impact of macroeconomic indicator (including the production index, inflat... more 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...
The cotemporary dual monetary system is characterized by an interest system in conventional syste... more 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...
. This study examines determinants of cost efficiency of banking operation in ASEAN-5 region whic... more . This study examines determinants of cost efficiency of banking operation in ASEAN-5 region which includes Indonesia, Singapura, Malaysia, the Philippines, and Thailand. By using stochastic frontier analysis (SFA) to 23 commercial banks in the region in the period of 2005-2012, empirical results reveal certain significant relationship of cost efficiency with individual bank characteristic (return on equity, ROE). Based on the time-varying decay method, we conclude that there is an increase in cost efficiency during the period of study. This study also shows that in general, Indonesian banking industry was not operating efficiently.
This paper examines the impact of institutional quality (government effectiveness index, voice an... more This paper examines the impact of institutional quality (government effectiveness index, voice and accountability index, and political stability) and economic variables (Gross Domestic Product [GDP], inflation, trade openness, and gross fixed capital formation) on Foreign Direct Investment (FDI) inflows in ASEAN 2012–2016 by using panel data analysis. The obtained results indicate that economics variables have a greater impact on FDI than political stability indicator. Our findings also suggest that insignificant effect of democracy and institutional quality indicator on FDI caused by the high level of corruption in ASEAN which maybe has a crowding out effect to level of democracy and institutional quality. ----------------------------------- Tujuan dari penelitian ini adalah untuk mengetahui pengaruh kualitas institusi (indeks government effectiveness, indeks voice and accountability, indeks stabilitas politik) dan variabel ekonomi lain (Gross Domestic Product [GDP], inflasi, keter...
Middle-income trap (MIT) refers to a condition in which the middle-income countries are not able ... more 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 purpose of this study is to analyze effects of the real exchange rate (RER) on the Indonesia&... more The purpose of this study is to analyze effects of the real exchange rate (RER) on the Indonesia's bilateral trade balance with its three major trading partners, namely: the US, China, and Japan, both in the short run and in the long run. This study also investigates the Marshall-Lerner Condition and the existence of the J-Curve on the Indonesia's bilateral trade balance for the period 1996:Q1 to 2011:Q4 using a Vector Error Correction Model (VECM). The study indicates that (i): in the long-run, RER has a positive impact in the long-run Indonesia's bilateral trade balance with China and Japan. On the other hand, RER has a negative impact on the Indonesia's bilateral trade balance with US; (ii) The Marshall-Lerner Condition and the J-Curve Phenomenon were only seen on the Indonesia's bilateral trade balance with China and Japan.
This research aims to measure the effectiveness of monetary policy transmission, especially throu... more This research aims to measure the effectiveness of monetary policy transmission, especially through the interest rate channel. The analysis was conducted on the first stage of its transmission, namely Interest Rate Pass-through (IRPT). IRPT refers to condition in which retail interest rate (both deposit and lending rate) responds to changes in policy rate of central bank. IRPT was measured using Error Correction Model (ECM) for time series data in the period of January 2010 - December 2015. The results of this study indicated that degree of long term and short term IRPT is incomplete for deposit and lending rate. In addition, IRPT for deposit rate is higher than lending rate, but the adjustment process of lending rate faster than deposit rate. Finally, model that include other variables (macroeconomic and internal banking indicator) generate long term IRPT which is smaller than the standard model. This results implies that the Central Bank, the FSA, and government needs to pay atten...
Indonesian Journal of Business and Entrepreneurship
Micro and small industry sector plays an important role in the economy of a country including Ind... more 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.
Banking and stock market are two financial institutions which play an important role in the econo... more Banking and stock market are two financial institutions which play an important role in the economic development process. Many studies suggest that the development of banking and stock market are able to increase the economic growth. There are factors which influence the development of these two financial institutions, for example macroeconomic stability and institutional influences such as corruption. This study aims to analyze how corruption affects the development of banking and stock market and also tries to identify the role of development of banking to reduce corruption. This study uses panel data for nine countries of ASEAN +3 region, during 2003-2012. The result shows that corruption hinders the development of banking and stock market. In addition, banking development will reduce corruption.
This paper analyzes the impact of macroeconomic indicator (including the production index, inflat... more 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...
The cotemporary dual monetary system is characterized by an interest system in conventional syste... more 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...
. This study examines determinants of cost efficiency of banking operation in ASEAN-5 region whic... more . This study examines determinants of cost efficiency of banking operation in ASEAN-5 region which includes Indonesia, Singapura, Malaysia, the Philippines, and Thailand. By using stochastic frontier analysis (SFA) to 23 commercial banks in the region in the period of 2005-2012, empirical results reveal certain significant relationship of cost efficiency with individual bank characteristic (return on equity, ROE). Based on the time-varying decay method, we conclude that there is an increase in cost efficiency during the period of study. This study also shows that in general, Indonesian banking industry was not operating efficiently.
This paper examines the impact of institutional quality (government effectiveness index, voice an... more This paper examines the impact of institutional quality (government effectiveness index, voice and accountability index, and political stability) and economic variables (Gross Domestic Product [GDP], inflation, trade openness, and gross fixed capital formation) on Foreign Direct Investment (FDI) inflows in ASEAN 2012–2016 by using panel data analysis. The obtained results indicate that economics variables have a greater impact on FDI than political stability indicator. Our findings also suggest that insignificant effect of democracy and institutional quality indicator on FDI caused by the high level of corruption in ASEAN which maybe has a crowding out effect to level of democracy and institutional quality. ----------------------------------- Tujuan dari penelitian ini adalah untuk mengetahui pengaruh kualitas institusi (indeks government effectiveness, indeks voice and accountability, indeks stabilitas politik) dan variabel ekonomi lain (Gross Domestic Product [GDP], inflasi, keter...
Middle-income trap (MIT) refers to a condition in which the middle-income countries are not able ... more 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.
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