The Global Economic Crisis and Its Impact on Bank Lending in Indonesia

Abstract

This study examined the impact of the crisis on bank lending in Indonesia. The crisis was also interacted with profitability and liquidity to see the impact of profitability and liquidity during the global economic crisis on bank lending in Indonesia. This study involves bank specific as control variable and macroeconomic variables. Using panel data, I constructed a panel of 1,372 bank-year observations for 98 banks in Indonesiain the period 2002-2015. The empirical results showed that the profitability proxyed from Return On Asset affected bank lending negatively, but this effect was relatively insignificant. The study also found a positive and significant impact between liquidity and bank lending in Indonesia. Meanwhile only GDP which had a significant impact on lending with a positive sign.

Keywords

• Crisis
• Liquidity
• Profitability