An Ardl Approach to Identify Bank Landing Channel in Indonesia

Akhsyim Afandi

Abstract

This paper tests whether the bank lending channel works in Indonesia. It develops an error
correction representation of the Autoregressive Distributed Lag (ARDL) model of two bank
credit markets. Each model takes account of one structural break associated with the 1998
financial crisis. The date of the crisis is determined by a unit root test that includes two
structural breaks. Instead of Johansen’s cointegrating procedure, bounds test procedure is
implemented. The estimated error correction model for both markets suggests that bank
loans adjust more strongly towards loan supply, implying that monetary-induced disturbances
in bank loans originate from the supply side.
Keywords: bank lending channel, unit root, structural breaks

Full Text:

PDF




Economic Journal of Emerging Markets indexed in:
  

  Harvard Library   Google Scholar Indonesian Publication Index (IPI)   WorldCat  Harvard Library  University of Oxford    
 
 Creative Commons License
Economic Journal of Emerging Markets by http://journal.uii.ac.id/JEP/ is licensed under a Creative Commons Attribution 4.0 International License.