The Determinants of Net Interest Margin in the Indonesian Banking Sector

23 Pages Posted: 29 Aug 2011  

Louvti Rodney Sidabalok

Central Bank of Indonesia

Viverita D.

Department of Management Faculty of Economics and Business Universitas Indonesia

Multiple version iconThere are 2 versions of this paper

Date Written: August 26, 2011

Abstract

This study analyzes the determinants of net interest margin of the Indonesian banking sector over the period of 2003-2009 using a dynamic panel data methodology. Following the basic model of Ho and Saunders (1981) and later extension by Maudos and Solis (2010), the results show consistent findings from previous studies. It found that high and persistence net interest margin in the Indonesian banking sector was caused by a wide pure spread, bank’s specific factors, as well as market power. Furthermore, bank’s specific factor such as high operating costs contributes to high net interest margin.

Keywords: net interest margin, market power, dynamic panel data

JEL Classification: C33, G21, L11

Suggested Citation

Sidabalok, Louvti Rodney and D., Viverita, The Determinants of Net Interest Margin in the Indonesian Banking Sector (August 26, 2011). Available at SSRN: https://ssrn.com/abstract=1917367 or http://dx.doi.org/10.2139/ssrn.1917367

Louvti Rodney Sidabalok (Contact Author)

Central Bank of Indonesia ( email )

Indonesia

Viverita D.

Department of Management Faculty of Economics and Business Universitas Indonesia ( email )

Depok, West Java 16424
Indonesia
+62217270164 (Phone)
+622178849155 (Fax)

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