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All Journal Economic Development Analysis Journal
Jannatul Liutammima Musta'in
Universitas Ahmad Dahlan
Economics, Econometrics & Finance

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Macroprudential Policy and Credit Risk in Dual Banking System Jannatul Liutammima Musta'in; Faaza Fakhrunnas
Economics Development Analysis Journal Vol 10 No 2 (2021): Economics Development Analysis Journal
Publisher : Economics Development Department, Universitas Negeri Semarang, Indonesia

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.15294/edaj.v10i2.43092

Abstract

Issues related to financial stability are a very complex problem, especially the global crisis impact in 2008. Based on these conditions, the Basel Committee on Banking Supervision introduced a macroprudential policy to mitigate financial system risk systemically. The study aims to analyze the impact of macroprudential policy on the banks’ risk exposure by adopting credit risk as a risk proxy. By adopting a panel dynamic approach, credit risk is used to be a dependent variable while independent variables consist of the reserve requirement, capital buffer, and a net open position in either conventional and Islamic banks. The observation period starts from 2014 to 2019 with quarterly data, and it involves 22 banks in Indonesia. The study found that macroprudential policy has a long-run relationship to Islamic banks' credit risk but not to conventional banks. The result from Variance Decompositions (VDs) and Impulse Response Factors (IRFs) also showed that each independent variables have an impact to credit risk value in many different directions. According to that, this study suggests that Indonesian financial authority has to pay attention to the different effectiveness and impact of its macroprudential policy, which has to consider the specific characteristics of either conventional or Islamic banks..
Co-Authors Faaza Fakhrunnas