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The Behavior of the Post-Crises Indonesian Banking Industry (An Analysis Based on Oligopoly Theory and Dynamic Panel Data Econometrics)

Author

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  • Moch. Doddy Ariefianto

    (Faculty of Economics, Ma Chung University, Malang, Indonesia)

Abstract

This article focuses on the behavior of Indonesian banking industry, especially after the 1998 Asian Financial Crisis. The analytical approach and hypotheses construction employ the well- known oligopoly theory of Cournot and Stackleberg. This approach for banking was first introduced by Monti (1971) and Klein (1972), which was subsequently developed by Toolsema and Schoonbeck (1999) and Yamazaki and Miyamoto (2004). This study expands the model further through introducing market leadership and the existence of the inter-bank money market. A panel data set composed of 30 banks with a monthly frequency spanning from January 2002 to December 2008 is constructed in order to verify the hypotheses. An econometric method of Dynamic Panel Data (DPD) is employed, since the model is characterized by endogeneity. The estimation and inference therein show that Indonesian Banking behavior is of the Stackleberg-Bertrand variant. Banks suspected to dominate the industry are Bank Mandiri, BCA and Citibank

Suggested Citation

  • Moch. Doddy Ariefianto, 2010. "The Behavior of the Post-Crises Indonesian Banking Industry (An Analysis Based on Oligopoly Theory and Dynamic Panel Data Econometrics)," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 58, pages 269-284, December.
    • Handle: RePEc:lpe:efijnl:201013
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    More about this item

    Keywords

    Oligopoly Theory; Market Leadership; Dynamic Panel Data; Endogeneity;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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