DYNAMIC RELATIONSHIP BETWEEN CAPITAL INFLOWS AND BANK LENDING: THE ROLE OF COMMODITY PRICE AND GLOBAL FINANCIAL MARKET SHOCKS

Authors

Doni Satria, University of Indonesia, IndonesiaFollow
Nachrowi Djalal Nachrowi, University of Indonesia, IndonesiaFollow
Telisa A. Falianty, University of Indonesia, IndonesiaFollow
Iskandar Simorangkir, Ministry of Economic Coordinator Republic of Indonesia, IndonesiaFollow

Document Type

Article

Abstract

This paper investigates the dynamic relationship between capital inflows and bank lending in Indonesia. We use a Structural Vector AutoRegression (SVAR) model that allows exogenous international commodity prices and global financial market fluctuations to influence capital inflows. We find that commodity price shocks are more important as compared to global financial shocks in explaining the variance of capital inflows in the long run. Furthermore, shocks from capital inflows lead to a change in bank lending allocation across economic sectors.

Recommended Citation

Satria, Doni; Nachrowi, Nachrowi Djalal; Falianty, Telisa A.; and Simorangkir, Iskandar (2021) "DYNAMIC RELATIONSHIP BETWEEN CAPITAL INFLOWS AND BANK LENDING: THE ROLE OF COMMODITY PRICE AND GLOBAL FINANCIAL MARKET SHOCKS," Bulletin of Monetary Economics and Banking: Vol. 24: No. 4, Article 4.
DOI: https://doi.org/10.21098/bemp.v24i4.1170
Available at: https://bulletin.bmeb-bi.org/bmeb/vol24/iss4/4

First Page

589

Last Page

630

Creative Commons License

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

Country

Indonesia

Affiliation

University of Indonesia