THE CONVERGENCE TEST OF INDONESIA BANKING INEFFICIENCY: DO MACROECONOMIC INDICATORS MATTER?

Authors

Rudi Purwono, Airlangga University, IndonesiaFollow
Mohammad Zeqi Yasin, Coordinating Ministry for Economic Affairs, IndonesiaFollow

Document Type

Article

Abstract

This paper analyzes the inefficiency convergence of Indonesian banks using StochasticFrontier Analysis and panel data estimation, covering the period after financial crisis2008 until 2017. This paper also investigates the determinant of this inefficiencyimplying the convergence. To estimate the inefficiency rate, proxied by price ofloan, this paper uses three inputs including price of labor, price capital, and price offund. Our analysis shows that during 2008-2017 the inefficiency score converged ata speed of 26.2 %. Furthermore inflation, gross domestic product, and exchange ratesignificantly affect the growth of inefficiency convergence. This paper contributes tothe empirical literatures particularly on banking research. Overall, the findings implythat policymakers can mitigate the effects of the global financial crisis by loweringinterest rate, providing fiscal stimulus, as well as protecting the poorest from financialdeterioration.

Recommended Citation

Purwono, Rudi and Yasin, Mohammad Zeqi (2018) "THE CONVERGENCE TEST OF INDONESIA BANKING INEFFICIENCY: DO MACROECONOMIC INDICATORS MATTER?," Bulletin of Monetary Economics and Banking: Vol. 21: No. 1, Article 1.
DOI: https://doi.org/10.21098/bemp.v21i1.946
Available at: https://bulletin.bmeb-bi.org/bmeb/vol21/iss1/1

First Page

123

Last Page

137

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Country

Indonesia

Affiliation

Airlangga University