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

Author

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  • Faaza Fakhrunnas
  • Wulan Dari
  • Mustika Noor Mifrahi

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 Dari & 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.
    • Handle: RePEc:uii:journl:v:10:y:2018:i:2:p:165-176:id:10802
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    File URL: https://journal.uii.ac.id/JEP/article/view/10802/8628
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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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