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Macroeconomic effect and risk-taking behavior in a dual banking system

Author

Listed:
  • Faaza Fakhrunnas
  • Wulan Dar
  • Mustika Noor Mifrahi

    (Department of Economics, Universitas Islam Indonesia, Yogyakarta, Indonesia
    Durham University Business School, Durham University, United Kingdom
    Department of Economics, Universitas Islam Indonesia, Yogyakarta, Indonesia)

Abstract

This study aims to analyze the relationship between macroeconomic factors and risk-taking behavior in a dual banking system. Adopting a panel cointegration approach, this research posits macroeconomic factors as exogenous variables and risk-taking behavior as endogenous variables. With having 468 quarterly- observations consisting of 18 banks in Indonesia during 2010-Q4 to 2017-Q1, it finds that the risk-taking behavior of the banks has a long-term relationship with macroeconomic factors. Moreover, conventional bank has long-term relationship to macroeconomic nonetheless it results inversely to Islamic bank. In terms of bank- specified characteristics, bank size and equity to asset ratio are substantial factors for the banks’ risk mitigation.

Suggested Citation

  • Faaza Fakhrunnas & Wulan Dar & Mustika Noor Mifrahi, 2018. "Macroeconomic effect and risk-taking behavior in a dual banking system," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 10(2), pages 165-176, Oktober.
    • Handle: RePEc:uii:journl:v:10:y:2018:i:2:p:165-176
    DOI: 10.20885/ejem.vol10.iss2.art5
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    Cited by:

    1. MB Hendrie Anto & Faaza Fakhrunnas & Yunice Karina Tumewang, 2022. "Islamic banks credit risk performance for home financing: Before and during Covid-19 pandemic," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 14(1), pages 113-125.

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    More about this item

    Keywords

    Risk-taking behavior; Macroeconomic Factors; Dual banking system;
    All these keywords.

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G00 - Financial Economics - - General - - - General

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