The Determinants of Net Interest Margin in the Indonesian Banking Sector
23 Pages Posted: 29 Aug 2011
Date Written: August 26, 2011
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: Suggested Citation