The Effects of European Bilateral Debt Crisis on International Banking Finance Behavior in The Philippines and Indonesia

Abstract

European sovereign debt crisis phenomenon becomes the evidence of unstable economy as impact of financial and banking liberalization that debating with focused about the benefit and cost that will be taken by the flow of international bank lending from European Union (EU) to Philippines and Indonesia. This research is aimed to identify the determination of international bank lending that divide to be push factor and pull factor, and the deepening of contagion effect of European sovereign debt crisis and the opportunity of financial risk mitigation scenario in Philippines and Indonesia. Implementation of analysis method is such as Ordinary Least Square (OLS), Generalized Method of Moment (GMM), and Diagnostic Selection Test. The result of analysis showed that the EU economic turmoil due to bilateral debt crisis caused shocks to the financial markets in the Philippines and Indonesia indicated by the fluctuation of international bank lending in line with the fluctuation of the economic growth of the EU.