Threshold Panel Method for Analysis of the Effect of Banking Investment Allocation on Banking Performance, A Cross Country Studies: Some OECD Countries
Abstract
The direction of globalization and the integration of the financial system continues to increase in line with the trend of increasing capital flows which is the focus of discussion in this research. This study applies panel data analysis to analyze banking behavior to improve its performance. The analysis uses a linear model and a threshold model—panel data from 1991 to 2020 in 39 countries. Threshold panel regression is a non-linear model applied in this study to prove a change in the impact of independent variables that affect banking performance in specific regimes. In general, the linear model Coef.icients are as expected according to the theory. Analysis using threshold panel regression will give more profound results and higher intuition. Threshold panel regression has a smaller SSR value than the linear model. This study applies one threshold value to produce two different regimes. Changes in the impact occur at a certain threshold. Conclusively, this study finds threshold values ??for GDP growth, Concentration, Inflation, Leverage, Efficiency, and Credit Allocation. The GDP growth rate as a threshold is the most efficient model. The Coef.icients on the threshold panel regression model generally are in line with theoretical expectations. Still, some differences become the advantages of this non-linear model, revealing different economic conditions.
Downloads
Download data is not yet available.
References
Afanasyeva, Elena and Güntner, Jochen, 2015, Lending Standards, Credit Booms, and Monetary Policy, No 15115, Economics Working Papers from Hoover Institution, Stanford University.
Aisen, A., & Franken, M. 2010. Bank credit during the 2008 financial crisis: a cross-country comparison. International Monetary Fund Working Paper, No.10/47.
Aoki, K., Benigno, G., & Kiyotaki, N. 2009. Capital Flows and Asset Prices. CEP Discussion Papers.
Barnes, Sebastian., & Lawson, Jeremy., and Radziwill, Artur., 2010. "Current Account Imbalances in the Euro Area: A Comparative Perspective," OECD Economics Department Working Papers 826, OECD Publishing. DOI: 10.1787/5km33svj7pxs-en
Beck, T., Büyükkarabacak, B., Rioja, F. K., & Valev, N. 2012. Who Gets the Credit? And Does It Matter? Household vs. Firm Lending Across Countries. The B.E. Journal of Macroeconomics, Volume 12, Issue 1.
Bezemer, D., Samarina, A., & Zhang, L. 2017. The shift in bank credit allocation: new data and new findings. DNB Working Paper, 559.
Blanchard, O., & Giavazzi, F. 2002. Current account deficits in the Euro area: The end of the Feldstein-Horioka puzzle? Brookings Papers on Economic Activity, 2.
Calderón, César & Kubota, Megumi, 2019. "Ride the Wild Surf: An investigation of the drivers of surges in capital inflows," Journal of International Money and Finance, Elsevier, vol. 92, pages 112-136. DOI: 10.1016/j.jimonfin.2018.11.007
Cai, Yue, 2021. "Expansionary monetary policy and credit allocation: Evidence from China," China Economic Review, Elsevier, vol. 66. DOI: 10.1016/j.chieco.2021.101595
Claessens, S., & Horen, N. V. 2014. Foreign Banks: Trends and Impact. Journal of Money, Credit and Banking Volume 46 Issue s1, 295-326.
Demirgüç-Kunt, Asli, Laeven, Luc and Ross Levine, 2004, “Regulations, Market Structure, Institutions, and the Cost of Financial Intermediation.” Journal of Money, Credit and Banking, 36 (3 Pt.2), 593-622.
Ekananda, M., 2018, Miss-Invoicing Analysis In Asean-China Free Trade Aggrement (ACFTA), European Research Studies Journal Volume XXI, Issue 1, p. 187-205
Ekananda, M., 2019, The Analysis of The Effect of Non-Bank Sector Investment to The Bank Credit Allocation, The Asia-Pacific Research in Social Sciences and Humanities Conference 2018 – Universitas Indonesia, BOOK Chapter, NOVA SCIENCE PUBLISHERS, INC, SECTION 3, CHAPTER 14, ISBN: 978-1-53616-276-9
Greene, William H 2018, Econometric Analysis, ISBN: 0134461363, 9780134461366 , eighth Edition, Pearson 2018, New York.
Han, Liang., Zhang, Song and Greene, Francis J., 2015, Bank market concentration, relationship banking, and small business liquidity, Article first published online: December 28, 2015; Issue published: June 1, 2017, Volume: 35 issue: 4, page(s): 365-384. https://doi.org/10.1177/0266242615618733
Hansen, B. E. 1999, Threshold Effects in Non-Dynamic Panels: Estimation, Testing, and Inference, Journal of Econometrics, pp. 345-368.
Igan, D., & Tan, Z. 1995. Capital Inflows, Credit Growth, and Financial Systems. IMF Working Paper. 19 Aug 2015, SBN: 9781513581262
IMF. 2017. Increasing Resilience to Large and Volatile Capital Flows: The Role of Macroprudential Policies, Press Release No. 17/260, For Immediate Release, July 5, 2017, International Monetary Fund, 700 19th Street, NW, Washington, D.C. 20431 USA
Kusi, Baah Aye., Adzobu, Lydia., Abasi, Alex Kwame., and Ansah-Adu, Kwadjo., 2019, Sectoral Loan Portfolio Concentration and Bank Stability: Evidence from an Emerging Economy, Volume: 19 issue: 1, page(s): 66-99, Article first published online: December 9, 2019; Issue published: April 1, 2020, https://doi.org/10.1177/0972652719878597
Lane, Philip R & Milesi-Ferretti, Gian Maria, 2010, The Cross-Country Incidence of the Global Crisis, IMF Economic Review volume 59, pages77–110. Published: 23 November 2010
Lucas, J. R. 1990. Why doesn't capital flow from rich to poor countries? The American Economic Review, Vol 80, No.2.
Mendoza, Jorge Eduardo & Calderon, Cuauhtemoc, 2006. "Impactos regionales de las remesas en el crecimiento económico de México [Regional impacts of remittances on the economic growth of Mexico]," MPRA Paper 3331, University Library of Munich, Germany, revised Sep 2006.
Samarina, A., & Bezemer, D. 2016. Do Capital Flows Change Domestic Credit Allocation? Journal of International Money and Finance.
Seoa, Myung Hwan, Kim, S., and Kim, Y., 2019, Estimation of Dynamic Panel Threshold Model using Stata, Department of Economics, Seoul National University, bDepartment of Economics, University of Maryland, Department of Economics, Hongik University, February 28, 2019.
Sophocles, N. B., Garganas, E. N., & Hall, S. G. 2012. Consumer credit in an era of financial liberalisation: An overreaction to repressed demand? MPRA Paper No.41819.
Soydan, Aylin., & Kara, Serap Bedir., 2020. "Implications of Capital Flows for Domestic Credit Growth: Evidence from Panel Data Analysis," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 8(4), pages 231-245.
Spyros, P., Eleni, K., & Helen, L. 2014. Bank leverage and return on equity targeting: intrinsic procyclicality of short-term choices. Bank of Greece Working Paper.
Sufian, Fadzlan and Habibullah, Muzafar Shah ,2010, Bank-specific, Industry-specific and Macroeconomic Determinants of Bank Efficiency: Empirical Evidence from the Thai Banking Sector, The Journal of Applied Economic Research, vol. 4, 4: pp. 427-461. , First Published December 17, 2010.
Summers, L. 2013. Speech at the 14th annual IMF research conference: Crises yesterday and today.
Wang, Q. 2015 Fixed-effect panel threshold model using Stata, Institute of Statistics and Econometrics, Nankai University, Tianjin, China, The Stata Journal, 15, Number 1, pp. 121–134.
Weller, Christian E., 2009, Credit Access, the Costs of Credit and Credit Market Discrimination, The Review of Black Political Economy, Volume: 36 issue: 1, page(s): 7-28, January 1, 2009; Issue published: January 1, 2009. https://doi.org/10.1007/s12114-009-9034-6
Wooldridge. 2002. Econometric Analysis of Cross Section and Panel Data. MIT Press.
Aisen, A., & Franken, M. 2010. Bank credit during the 2008 financial crisis: a cross-country comparison. International Monetary Fund Working Paper, No.10/47.
Aoki, K., Benigno, G., & Kiyotaki, N. 2009. Capital Flows and Asset Prices. CEP Discussion Papers.
Barnes, Sebastian., & Lawson, Jeremy., and Radziwill, Artur., 2010. "Current Account Imbalances in the Euro Area: A Comparative Perspective," OECD Economics Department Working Papers 826, OECD Publishing. DOI: 10.1787/5km33svj7pxs-en
Beck, T., Büyükkarabacak, B., Rioja, F. K., & Valev, N. 2012. Who Gets the Credit? And Does It Matter? Household vs. Firm Lending Across Countries. The B.E. Journal of Macroeconomics, Volume 12, Issue 1.
Bezemer, D., Samarina, A., & Zhang, L. 2017. The shift in bank credit allocation: new data and new findings. DNB Working Paper, 559.
Blanchard, O., & Giavazzi, F. 2002. Current account deficits in the Euro area: The end of the Feldstein-Horioka puzzle? Brookings Papers on Economic Activity, 2.
Calderón, César & Kubota, Megumi, 2019. "Ride the Wild Surf: An investigation of the drivers of surges in capital inflows," Journal of International Money and Finance, Elsevier, vol. 92, pages 112-136. DOI: 10.1016/j.jimonfin.2018.11.007
Cai, Yue, 2021. "Expansionary monetary policy and credit allocation: Evidence from China," China Economic Review, Elsevier, vol. 66. DOI: 10.1016/j.chieco.2021.101595
Claessens, S., & Horen, N. V. 2014. Foreign Banks: Trends and Impact. Journal of Money, Credit and Banking Volume 46 Issue s1, 295-326.
Demirgüç-Kunt, Asli, Laeven, Luc and Ross Levine, 2004, “Regulations, Market Structure, Institutions, and the Cost of Financial Intermediation.” Journal of Money, Credit and Banking, 36 (3 Pt.2), 593-622.
Ekananda, M., 2018, Miss-Invoicing Analysis In Asean-China Free Trade Aggrement (ACFTA), European Research Studies Journal Volume XXI, Issue 1, p. 187-205
Ekananda, M., 2019, The Analysis of The Effect of Non-Bank Sector Investment to The Bank Credit Allocation, The Asia-Pacific Research in Social Sciences and Humanities Conference 2018 – Universitas Indonesia, BOOK Chapter, NOVA SCIENCE PUBLISHERS, INC, SECTION 3, CHAPTER 14, ISBN: 978-1-53616-276-9
Greene, William H 2018, Econometric Analysis, ISBN: 0134461363, 9780134461366 , eighth Edition, Pearson 2018, New York.
Han, Liang., Zhang, Song and Greene, Francis J., 2015, Bank market concentration, relationship banking, and small business liquidity, Article first published online: December 28, 2015; Issue published: June 1, 2017, Volume: 35 issue: 4, page(s): 365-384. https://doi.org/10.1177/0266242615618733
Hansen, B. E. 1999, Threshold Effects in Non-Dynamic Panels: Estimation, Testing, and Inference, Journal of Econometrics, pp. 345-368.
Igan, D., & Tan, Z. 1995. Capital Inflows, Credit Growth, and Financial Systems. IMF Working Paper. 19 Aug 2015, SBN: 9781513581262
IMF. 2017. Increasing Resilience to Large and Volatile Capital Flows: The Role of Macroprudential Policies, Press Release No. 17/260, For Immediate Release, July 5, 2017, International Monetary Fund, 700 19th Street, NW, Washington, D.C. 20431 USA
Kusi, Baah Aye., Adzobu, Lydia., Abasi, Alex Kwame., and Ansah-Adu, Kwadjo., 2019, Sectoral Loan Portfolio Concentration and Bank Stability: Evidence from an Emerging Economy, Volume: 19 issue: 1, page(s): 66-99, Article first published online: December 9, 2019; Issue published: April 1, 2020, https://doi.org/10.1177/0972652719878597
Lane, Philip R & Milesi-Ferretti, Gian Maria, 2010, The Cross-Country Incidence of the Global Crisis, IMF Economic Review volume 59, pages77–110. Published: 23 November 2010
Lucas, J. R. 1990. Why doesn't capital flow from rich to poor countries? The American Economic Review, Vol 80, No.2.
Mendoza, Jorge Eduardo & Calderon, Cuauhtemoc, 2006. "Impactos regionales de las remesas en el crecimiento económico de México [Regional impacts of remittances on the economic growth of Mexico]," MPRA Paper 3331, University Library of Munich, Germany, revised Sep 2006.
Samarina, A., & Bezemer, D. 2016. Do Capital Flows Change Domestic Credit Allocation? Journal of International Money and Finance.
Seoa, Myung Hwan, Kim, S., and Kim, Y., 2019, Estimation of Dynamic Panel Threshold Model using Stata, Department of Economics, Seoul National University, bDepartment of Economics, University of Maryland, Department of Economics, Hongik University, February 28, 2019.
Sophocles, N. B., Garganas, E. N., & Hall, S. G. 2012. Consumer credit in an era of financial liberalisation: An overreaction to repressed demand? MPRA Paper No.41819.
Soydan, Aylin., & Kara, Serap Bedir., 2020. "Implications of Capital Flows for Domestic Credit Growth: Evidence from Panel Data Analysis," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 8(4), pages 231-245.
Spyros, P., Eleni, K., & Helen, L. 2014. Bank leverage and return on equity targeting: intrinsic procyclicality of short-term choices. Bank of Greece Working Paper.
Sufian, Fadzlan and Habibullah, Muzafar Shah ,2010, Bank-specific, Industry-specific and Macroeconomic Determinants of Bank Efficiency: Empirical Evidence from the Thai Banking Sector, The Journal of Applied Economic Research, vol. 4, 4: pp. 427-461. , First Published December 17, 2010.
Summers, L. 2013. Speech at the 14th annual IMF research conference: Crises yesterday and today.
Wang, Q. 2015 Fixed-effect panel threshold model using Stata, Institute of Statistics and Econometrics, Nankai University, Tianjin, China, The Stata Journal, 15, Number 1, pp. 121–134.
Weller, Christian E., 2009, Credit Access, the Costs of Credit and Credit Market Discrimination, The Review of Black Political Economy, Volume: 36 issue: 1, page(s): 7-28, January 1, 2009; Issue published: January 1, 2009. https://doi.org/10.1007/s12114-009-9034-6
Wooldridge. 2002. Econometric Analysis of Cross Section and Panel Data. MIT Press.
Published
2022-08-18
How to Cite
EKANANDA, Mahjus.
Threshold Panel Method for Analysis of the Effect of Banking Investment Allocation on Banking Performance, A Cross Country Studies: Some OECD Countries.
Jurnal Ekonomi Kuantitatif Terapan, [S.l.], p. 179-196, aug. 2022.
ISSN 2303-0186.
Available at: <https://ojs.unud.ac.id/index.php/jekt/article/view/90099>. Date accessed: 25 apr. 2024.
doi: https://doi.org/10.24843/JEKT.2022.v15.i02.p02.
Section
Articles
Certificate
