Document Type
Article
Abstract
The previous financial crisis has revealed the importance of risk in the financial and business cycle within the economy. This paper examines relationship among three cycles in the economy, namely (i) business cycle macro risk, (ii) credit cycle and (iii) risk cycle, and their impacts toward individual bank performance. We examine the responses of individual bank credit cycle and risk cycle toward a shock in business cycle macro risk and its consequence to the bank performance. We use Indonesian data for period of 2005q1 to 2014q4. We use unbalanced panel data of individual banks’ balance sheet with Panel Vector Autoregressive approach based on GMM style estimation by implementing PVAR package developed by Abrigo and Love (2015). The result shows dynamic relationship between business cycle macro risk and financial risk cycles. The study also observes prominent role of risk cycles in driving bank performance. We also show the existence of financial accelerator phenomenon in Indonesian banking system, in which financial cycles precede the business cycle macro risk.
Recommended Citation
Irawan, Denny and Kacaribu, Febrio
(2017)
"TRI-CYCLES ANALYSIS ON BANK PERFORMANCE: PANEL VAR APPROACH,"
Bulletin of Monetary Economics and Banking: Vol. 19:
No.
4, Article 3.
DOI: https://doi.org/10.21098/bemp.v19i4.694
Available at:
https://bulletin.bmeb-bi.org/bmeb/vol19/iss4/3
First Page
403
Last Page
442
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License
Country
Indonesia
Affiliation
University of Indonesia
