International Journal of Scientific & Technology Research

Home About Us Scope Editorial Board Blog/Latest News Contact Us
10th percentile
Powered by  Scopus
Scopus coverage:
Nov 2018 to May 2020


IJSTR >> Volume 9 - Issue 6, June 2020 Edition

International Journal of Scientific & Technology Research  
International Journal of Scientific & Technology Research

Website: http://www.ijstr.org

ISSN 2277-8616

Cointegration Of Oil Price, Exchange Rate And Fed Rate To Bank Performance

[Full Text]



Muhammad Sofie Abdul Hasan, Adler Haymans Manurung, Bahtiar Usman



Bank Performance, RAROC, EVA, Oil Price, Fed Rate, Exchange Rate, Cointegration.



This research aims to explore Cointegration of Oil Price, Exchange Rate and Fed Rate to Bank Performance. This research uses graph analysis and Dickey Fuller to test cointegration for period data 2008 to 2018. The result is Bank performance which is RAROC and EVA has cointegration with Oil Price, but it does not integrate in long term between Fed Rate and Bank Performance. Exchange and RAROC also cointegrated to RAROC, but it does not cointegrate with EVA.



[1] Ahmed, A., Rehan, R., Chhapra, I. U., and S. Supro (2018), Interest Rate and Financial Performance of Banks in Pakistan, International Journal of Applied Economics, Finance and Accounting, Vol. 2 (1), pp. 1 – 7.
[2] Baer, T., Mehta, A. and H. Samandari (2011), The Use of Economic Capital in Performance Management for banks: A Perspective, McKinsey Working paper, No. 24, pp. 1 - 14.
[3] Borio, C., Gambacorta, L., and B. Hofmann (2017), The influence of monetary policy on bank profitability, International Finance, Vol. 20, pp. 48 – 63. https://doi.org/10.1111/infi.12104
[4] Chamberlain, S., Howe, J. S., and H. Popper (1997), The exchange rate exposure of U.S. and Japanese banking institutions, Journal of Banking & Finance 21, pp. 871-892.
[5] Darko, G. and J. Kruger (2017), Determinants of Oil Price Influence on Profitability Performance Measure of Oil and Gas Companies: A Panel Data Perspective, International Journal of Economics, Commerce and Management, Vol. 5 (12), pp. 993 – 1006.
[6] Dumicic, K., Bregar, L. and B. Zmuk (2014); Statistical Methods Use is Small Enterprises: Relation to Performance; Business System Research, Vol. 3, No. 4, pp. 37 - 48
[7] Effendi, K. A. (2019), Oil Prices and Macroeconomic on the Islamic Banking Performance in OPEC Member Countries, International Journal of Energy Economics and Policy, Vol. 9(1), pp. 200-204.
[8] Elhussein, N. H. A. and O. E. E. Osman (2019), Exchange Rate fluctuations and Financial Performance of Banks: Evidence from Sudan, International Journal of Economics and Finance; Vol. 11 (12), pp. 15 - 27.
[9] Engle, R. F. and C. W. J. Granger (1987), Co-integration and Error Correction, Representation, Estimation, and Testing, Econometrica, Vol. 55, pp. 251 – 276.
[10] Flannery, M. J. (1981), Market Interest Rates and Commercial Bank Profitability: An Empirical Investigation, Journal of Finance, Vol. 36 (5), pp. 1085-1101.
[11 Genay, H. and R. Podjasek (2014), What is the impact of a low interest rate environment on bank profitability?, Federal Reserve of Bank Chicago, Paper No. 324., pp. 1 – 4.
[12] Granger, C. W. J. (1981), Some Properties of Time Series Data and Their Use in Econometric Model Specification, Journal of Econometrics, Vol. 16, pp. 121 - 130.
[13] Hadi, A. R. A., Hussain, H. I., Suyanto, T and T. H. Yap (2018), Bank’s Performance and Its Determinants – Evidence from Middle East, Indian Sub-Continent and African Banks, Polish Journal of Management Studies, Vol. 17 (1), pp. 17 - 25.
[14] Hakimi, A., Hamdi, H., and M. Djelassi (2015), Testing the concentration-performance relationship in the Tunisian banking sector, Journal of Economics and Business Vol. 18 (2), pp. 41 – 62.
[15] Hancock, D. (1985), Bank Profitability, Interest Rates, and Monetary Policy, Journal of Money, Credit and Banking, Vol. 17 (2), pp. 189-202.
[16] Hasan, M.S. A, Manurung, A. H. and B. Usman (2020), Determinants of Bank Profitability with Size as Moderating Variable, Journal of Applied Finance & Banking, Vol. 10 (1), pp. 153 – 166.
[17] Hoffmann, P. S. (2011), Determinants of the Profitability of the US Banking Industry, International Journal of Business and Social Science, Vol. 2 (22), pp. 255 – 269.
[18] Jiang, Jun (2010); A Theory of Banking Regulation; European Journal of Economics, Finance and Administrative Science, Vol. 27.
[19] Kemisola, O. C., Ademola, O. J., Olamide, J. O., and O. I. Moses (2016), Exchange Rate Volatility and Banks Performance: Evidence from Nigeria, IIARD International Journal of Economics and Business Management, Vol. 2 (4), pp. 1 – 11.
[20] Klaassen, P. and van Eeghen, I., (2015), Analyzing bank performance – linking RoE, RoA and RAROC: U.S. commercial banks 1992–2014, Journal of Financial Perspectives, EY Global FS Institute, vol. 3(2), pp. 103-111.
[21] Kleff, Volker and Martin Weber (2008); How do Bank Determine Capital ? Empirical Evidence from Germany; Germain Economic Review, Vol. 9, No. 3; pp. 354 – 372.
[22] Lall, Pooran (2014), Factors affecting U.S. Banking Performance: Evidence From the 2007-2013 Financial Crisis, International Journal of Economics, Finance and Management, Vol. 3 (6), pp. 282 – 295.
[23] Lee, Chi-Chuan and Chien-Chiang Lee (2019), Oil price shocks and Chinese banking performance: Do country risks matter? Energy Economics, Vol. 77, pp. 46-53. doi.org/10.1016/j.eneco.2018.01.010
[24] Lima, G. F., de Castro, S. C., Pimenta Jr, T., and L. E. Gaio (2014); Performance of the different RAROC models and their relation with the creation of economic value A study of the largest banks operating in Brazil; Contaduría Administración Vol. 59, No. 4, pp. 87-104.
[25] Malik, M. F., Khan, S., Khan, M. I., F. Khan (2014), Interest Rate and Its Effect on Bank’s Profitability, Journal of Applied Environment and Biological Science, Vol. 4 (8S), pp. 225 – 229.
[26] Manurung, A. H., Usman, B. and J. C. Manurung (2020), Determinants of RAROC of Bank using Internal and External Bank Factor and Size as Moderating Variable. International Journal of Advanced Science and Technology, Vol. 29, (Forthmcoming)
[27] Manurung, Adler H. (2017), Financial Risk Management: Banking, PT Adler Manurung Press, Jakarta.
[28] Menicucci, E. and G. Paolucci, (2016), The determinants of bank profitability: empirical evidence from European banking sector, Journal of Financial Reporting and Accounting, Vol. 14 (1), pp.86 - 115,
[29] Merton, R. C. and A. Perold (1993), Theory of Risk Capital in Financial Firms, Journal of Applied Corporate Finance, Vol. 6 (3), pp. 16 – 32.
[30] Naimy, V. Y. (2012); The RAROC as an Alternative Model of Analyzing the Lebanese Banks’ Performance and Capital Allocation; Journal of Business & Financial Affairs, Vol. 1, No. 1; pp. 1- 5.
[31] Ngan, T. M. U (2015), Impact of Exchange Rate Fluctuations on Business Risk of Joint Stock Commercial Banks: Evidence from Vietnam, Research Journal of Finance and Accounting, Vol. 6 (4), pp. 123 – 128.
[32] Petria, N., Capraru, B. and I. Ihnatov (2015), Determinants of banks’ profitability: evidence from EU 27 banking systems, Procedia Economics and Finance, Vol. 20, pp. 518 – 524
[33] Poghosyan, T. and H. Hesse (2009), Oil Prices and Bank Profitability: Evidence from Major Oil-Exporting Countries in the Middle East and North Africa, IMF Working Paper, WP/09/220, pp. 1 – 22.
[34] Rotimi, M. E. and H. Ngalawa (2017), Oil Price Shocks and Economic Performance in Africa’s Oil Exporting Countries, AUDŒ, Vol. 13, no. 5, pp. 169-18.
[35] Saeed, Muhammad Sajid (2014), Bank-related, Industry-related and Macroeconomic Factors Affecting Bank Profitability: A Case of the United Kingdom, Research Journal of Finance and Accounting, Vol.5 (2), pp. 42 – 50.
[36] Saha, A., Ahmad, N. H. and S. G. Yeok (2016), Evaluation of Performance of Malaysian Banks in Risk Adjusted Return on Capital (RAROC) and Economic Value Added (EVA) Framework, Asian Academy of Management Journal of Accounting and Finance, Vol. 12 (1), pp. 25 –47.
[37] Staikouras, C. K. and G. E. Wood (2011), The Determinants of European Bank Profitability, International Business & Economics Research Journal, Vol. 3 (6), pp. 57 - 68.
[38] Svitek, I. M. (2001); Functions of Bank Capital; BIATEC, Rocnik Vol. 9, No. 5; pp. 37 –40.
[39] Turnbull, S. M. (2002), Bank and Business Performance Measurement, Economic Notes by Banca Monte dei Paschi di Siena SpA, vol. 31 (2), pp. 215–236.
[40] Verbeek, M. (2008), A Guide to Modern Econometrics, 3rd ed., John Wiley & Sons.
[41] Zaik, E., Walter, J., Kelling, G. and C. James (1996), RAROC at Bank of America: From Theory to Practice, Journal of Applied Corporate Finance, Vol. 9 (2), pp. 83 – 93.