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Dynamic Relationship Between Capital Inflows And Bank Lending: The Role Of Commodity Price And Global Financial Market Shocks

Author

Listed:
  • Doni Satria

    (Padang State University)

  • Nachrowi Djalal Nachrowi

    (Universitas Indonesia)

  • Telisa A. Falianty

    (Universitas Indonesia)

  • Iskandar Simorangkir

    (Ministry of Economic Coordinator Republic of Indonesia)

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.

Suggested Citation

  • Doni Satria & Nachrowi Djalal Nachrowi & Telisa A. Falianty & Iskandar Simorangkir, 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, Bank Indonesia, vol. 24(4), pages 589-630, December.
    • Handle: RePEc:idn:journl:v:24:y:2021:i:4e:p:589-630
    DOI: https://doi.org/10.21098/bemp.v24i4.1170
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    More about this item

    Keywords

    Commodity price shocks; Capital inflows; Bank lending; Financial stability;
    All these keywords.

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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