The Determinants of Banks' Net Interest Margin in Indonesia: A Dynamic Approach
23 Pages Posted: 25 Jan 2012
Date Written: January 23, 2012
Abstract
This study analyzes the net interest margin and its determinants of the Indonesian banks during the period of 2003-2009 using a dynamic panel data methodology. Results from the study show consistent findings with previous studies. It is found that there was high and persistence net interest margin of the Indonesian banks. The evidence also reveals that high net interest margin caused by a wide pure spread, bank's specific factors, as well as market power. Furthermore, it is also found that the previous NIM is the main and continual determinant of net interest margin. However, this study failed to confirm the pro-cyclical behavior in the Indonesian banks.
Keywords: net interest margin, market power, dynamic panel data
JEL Classification: C33, G21, L11
Suggested Citation: Suggested Citation
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