| dc.description.abstract | This study examines the non-performing loans of rural banks and macroeconomic factors in Indonesia, including inflation, exchange
rates, and interest rates. Theoretically, the existence of erratic macroeconomic conditions can affect the level of non-performing credit
risk in rural credit banks in Indonesia. The effect of macroeconomic conditions on non-performing loans has a different response for
each economic sector. The main objective of this study is to determine the effect of macroeconomic factors (inflation, exchange rates,
and interest rates) and bank-specific factors (credit) on the Non-Performing Loans (NPL) of Rural Banks in Indonesia for the period
from January 2015 to December 2018. This study uses a Vector Error Correction Model (VECM) estimation to determine the effect of
independent variables consisting of macroeconomic factors and bank-specific factors. Based on the estimation results of the Vector Error
Correction Model, three variables that have a positive and significant effect on long-term non-performing loans are credit, inflation, and
interest rates. Meanwhile, in the short term, there are only two variables that have a positive and significant effect on non-performing
loans, namely, credit and interest rates. Inflation and exchange rate variables have a negative and insignificant effect on bad credit in
the short term. | en_US |
