Document Type
Journal Article
Publication Title
Heliyon
Volume
9
Issue
7
Publisher
Elsevier
School
School of Business and Law
RAS ID
58320
Abstract
Using a novel panel data set we study the influence of monetary and macro-prudential policies on non-performing loans as a measure of credit risk in Indonesian banking industry from Q1 2010 to Q4 2022. The panel homogeneity assumption was verified through the utilization of the Chow and Roy-Zellner tests. The findings showed that the model was not homogenous, necessitating the use of the Pooled Mean Group (PMG) estimator. The results indicated that monetary and macro-prudential policies significantly impacted credit risk. Furthermore, tight monetary and macro-prudential policies increased and reduced credit risk in the long run, respectively. The findings also showed that a loosening monetary policy reduced credit risk in the short run. Therefore, higher authorities must establish effective monetary and macro-prudential policies to reduce the non-performing loan ratio and maintain credit risk in Indonesia's banking industry.
DOI
10.1016/j.heliyon.2023.e18229
Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 License.
Comments
Anwar, C. J., Suhendra, I., Purwanda, E., Salim, A., Rakhmawati, N. A., & Jie, F. (2023). Investigating the relationship between monetary policy, macro-prudential policy and credit risk in Indonesia banking industry. Heliyon, 9(7), article e18229. https://doi.org/10.1016/j.heliyon.2023.e18229