DYNAMIC RELATIONSHIP BETWEEN CAPITAL INFLOWS AND BANK LENDING: THE ROLE OF COMMODITY PRICE AND GLOBAL FINANCIAL MARKET SHOCKS

Doni Satria (), Nachrowi Djalal Nachrowi, Telisa A. Falianty and Iskandar Simorangkir
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Doni Satria: Padang State University
Nachrowi Djalal Nachrowi: Universitas Indonesia
Telisa A. Falianty: Universitas Indonesia
Iskandar Simorangkir: Ministry of Economic Coordinator Republic of Indonesia

Bulletin of Monetary Economics and Banking, 2021, vol. 24, issue 4, 589-630

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.

Keywords: Commodity price shocks; Capital inflows; Bank lending; Financial stability (search for similar items in EconPapers)
JEL-codes: F32 F41 G21 O16 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:24:y:2021:i:4e:p:589-630

DOI: 10.21098/bemp.v24i4.1170

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