This paper provides new evidence on the effects of bank capital requirements in Indonesia. In investigating the impact of bank capital requirements, we set up a simple model of the banking firm which can detect the impact of capital regulation on banks’ behaviour as well as having possible effects on the economy. In estimation, we use monthly panel data of all the banks that existed between 1997-1999, during which the crisis and regulatory forbearance occurred. Based on our econometric tests, we choose the Fixed Effects panel regression model because the bank specific characteristics are found to be crucial in Indonesia. Overall, the results suggest that regulatory capital takes part in the change of Indonesian banks’ behaviour. Bank credit is found to decelerate but with less than before the Indonesian government implemented a forbearance in capital requirements. The view that banks choose to shrink their balance sheet activities during the capital shocks is consistent with the findings.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by EconWPA in its series Finance with number
0212002.
Length: 24 pages Date of creation: 08 Dec 2002 Date of revision:
18 May 2003 Handle: RePEc:wpa:wuwpfi:0212002
Note: Type of Document - Acrobat PDF; prepared on IBM PC - PC- TEX/UNIX Sparc TeX; to print on Any; pages: 24 ; figures: N/A. Converted into Acrobat PDF from Latex, 24 pages. Contact details of provider: Web page: http://129.3.20.41
For technical questions regarding this item, or to correct its listing, contact: (EconWPA).
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Douglas W. Diamond & Raghuram G. Rajan, 2000.
"A Theory of Bank Capital,"
Journal of Finance,
American Finance Association, vol. 55(6), pages 2431-2465, December.
[Downloadable!] (restricted)
Other versions:
Douglas W. Diamond & Raghuram G. Rajan, .
"A Theory of Bank Capital,"
CRSP working papers
363, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)