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MACRO-FINANCIAL DETERMINANTS OF DEFAULT PROBABILITY USING COPULA: A CASE STUDY OF INDONESIAN BANKS
- Source :
- Buletin Ekonomi Moneter dan Perbankan. 25:597-622
- Publication Year :
- 2023
- Publisher :
- Bank Indonesia, Central Banking Research Department - Digital Commons, 2023.
-
Abstract
- We investigate the default probability of Indonesian banks using the copula approach and analyze the macro-financial factors that drive them. We use quarterly data comprised of 80 banks from 2005 to 2019. We find empirical evidence that Common Equity Tier 1 (CET 1) ratio, inefficiency ratio, and deposit ratio have negativelyimpacted the bank’s default probability. We also find that macroeconomic variables such as policy rate, real exchange, economic growth, and unemployment reduce the default probability. Our study suggests that regulators should focus on capital and deposit management policies to reduce bank risk-taking behaviour. Additionally, the policy rate effectively anticipated the banks’ default risk.
- Subjects :
- Finance
Subjects
Details
- ISSN :
- 24609196 and 14108046
- Volume :
- 25
- Database :
- OpenAIRE
- Journal :
- Buletin Ekonomi Moneter dan Perbankan
- Accession number :
- edsair.doi...........c7936b0f82bd894e5bd4a849857a7593
- Full Text :
- https://doi.org/10.21098/bemp.v25i4.1748