Winpor, Bartolomeus Azel and Hidayat, Ariodillah (2025) The Effect of Interest Rates, Exchange Rates, and Foreign Direct Investment on Financial Stability in Indonesia. Argumenta Oeconomica Cracoviensia, 1 (2). pp. 49-72. ISSN 1642-168X
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Abstract
Objective: The purpose of this study is to analyse the effect of interest rates, exchange rates, and foreign direct investment on the financial stability of banks in Indonesia. Research Design & Methods: This study uses secondary data in the form of time series data from 2007 to 2021. Data sources come from publications and dynamic statistics of the World Bank and International Monetary Fund (IMF). The analysis technique used is multiple linear regression analysis with the Ordinary Least Squares (OLS) method. Findings: The findings show that interest rates have a significant negative correlation with banking stability, while exchange rates and foreign direct investment have a significant positive correlation. Rising interest rates can reduce demand for credit and economic activity, while exchange rate depreciation can help improve financial stability by improving competitiveness of exports. Foreign direct investment also plays an important role in providing banks with stable long-term capital flows, helping to overcome liquidity challenges, and increasing the diversity of bank income. Policy responses to foreign direct investment during the global crisis and the COVID-19 pandemic showed significant differences, with an emphasis on incentives and stimuli to support post-pandemic economic recovery.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | interest rate, exchange rate, foreign direct investment, financial stability |
| Subjects: | H Social Sciences > HG Finance > HG1811-2351 Special classes of banks and financial institutions |
| Divisions: | 01-Faculty of Economics > 60201-Development Economics (S1) |
| Depositing User: | ariodillah hidayat ario hidayat |
| Date Deposited: | 19 Jun 2025 03:08 |
| Last Modified: | 19 Jun 2025 03:08 |
| URI: | http://repository.unsri.ac.id/id/eprint/175557 |
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