Capital Flows and Bank Risk-Taking Behavior: Evidence From Indonesia

Bayront Yudit Rumondor () and Pakasa Bary
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Bayront Yudit Rumondor: Economic and Monetary Policy Department, Bank Indonesia, Indonesia

Journal of Central Banking Theory and Practice, 2020, vol. 9, issue special issue, 33-53

Abstract: This paper investigates the impact of capital flows on bank risk-taking behavior. It undertakes two levels of empirical estimations, namely (i) single-country industry-level; and (ii) multi-country industry-level estimations, covering emerging market economies. The results suggest that capital inflows, in the form of portfolio investment, is significant in raising risk-taking behavior. Large banks are less aggressive in their risk-taking behavior vis-à-vis smaller banks. Such impact of portfolio investment on risk-taking behavior is also shown in the multi-country level estimates.

Keywords: Capital flows; Bank risk-taking behavior; Panel data (search for similar items in EconPapers)
JEL-codes: E0 F0 F1 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:cbk:journl:v:9:y:2020:i:si:p:33-53

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