Credit Risk Models For Five Major Sectors In Indonesia
This paper analyze Nonperforming Loan ratio to total credit (NPL), as a proxy forcredit risk, for five major economic sectors by utilizing panel data of 117 commercialbanks in Indonesia over period 2000Q1 to 2016Q3. Our empirical analysis shows thatreal economic growth is the main driver that is negatively correlated with credit risksin all sectors. The inverse relation is also found in commodity and housing price.Commodity price inflation affects NPL in manufacturing industry and trade sectors,meanwhile housing price inflation influences NPL in manufacturing industry, trade,and construction sectors. In addition, decreased in policy rate will decline credit riskin commodity, trade, and other sectors, meanwhile nominal exchange rate only affectscredit risks in other sector. Our assessment shows that credit risks in commodity andother sectors are more sensitive to real economic growth than those on manufacturingindustry and trade sectors. Real economic growth elasticities to credit risk forcommodity and other sectors are almost twice higher than for manufacturing industryand trade sectors. Thus, during economic contraction phase, NPL in commodity andother sectors will increase higher than NPL in manufacturing industry and tradesectors.
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