S z research article

Literature Review and Development of Hypothesis: Many 
studies use ROA as performance measure (Athanasoglou, P. 
P., Delis, M. D., & Staikouras, C. K. (2006); Hassan & Bashir, 
2003). In their study Demirgüç-Kunt and Detragiache (1998), 
employing multivariate logit model to analyze developed and 
developing 
economies 
found 
significant 
impact 
of 
macroeconomic variables toward banking sector performance. 
However, the relationships have mixed results. Emase, M. A. 
(2017), conducted a research on the effect of macroeconomic 
factors on bank profitability for 11 listed banks in the NSE 
using Panel data regression analysis with fixed effects, reports 
the positive and significant effect between GDP and banks’ 
performance.
The finding was supported by Maysa’a Munir MILHEM, 
Ibrahim Abed Alhaleem ABADEH, (2018), in their research, 
assessing the impact of macroeconomic determinants on 
banks’ profitability and liquidity in Jordan for the period 2005-
2015, employing panel data Regression analysis, found 
positive and significant relationship between GDP growth rate 
and banks’ performance.
However, Tahsin Karabulut , Gülşah Şen (2018), investigating 
macroeconomic indicators that affect international financial 
centers’ performance, employing panel data analysis method 
and found the negative and significant effect between GDP and 
banks’ performance. Not only that, but also Konadu, K. A., 
(2016), assessing the impact of macroeconomic variables on 
profitability of public limited commercial banks in Ghana for 
the period 1980-2014 employing Autoregressive Distributed 
Lag (ARDL) estimation technique found the negative and 
significant effect between GDP and banks’ performance.
However, in our view, GDP has positive effects on the banks’ 
performance due to the fact that, when the economy meet the 
favorable economic condition the financial transactions will be 
redressed and majority of borrowers are able to service their 
loans and that, the banks get their expectations (Sufian and 
Habibullah 2010). Supporting to the above, (Demirguc-Kunt & 
Huizinga, 1999) asserts that, the fast growing economy 
supports the banks performance. 
H
1
: GDP has positive impact on banks’ performance 
 
Furthermore, 
Sangeetha 
R, 
Moorarka 
Chinu 
(2019) 
researching the impact of macroeconomic variables on the 
profitability of Indian Commercial Banks listed in NIFTY, 
employing Correlation and Multiple Regression Analysis 
along with descriptive statistics and found the positive and 
significant effect between Inflation and banks’ performance. 
Also, Emase, M. A. (2017), conducted a research on the effect 
of macroeconomic factors on bank profitability for 11 listed 
banks in the NSE using Panel data regression analysis with 
fixed effects, and found the positive and significant effect 
between Inflation and banks’ performance. The results were 
supported by Maysa’a Munir MILHEM, Ibrahim Abed 
Alhaleem ABADEH, (2018) in their study assessing the 
impact of macroeconomic determinants on banks’ profitability 
and liquidity in Jordan for the period 2005-2015 employing 
panel data Regression analysis, found positive and significant 
relationship between Inflation rate and banks’ performance. 
Nevertheless, Tahsin Karabulut, Gülşah Şen (2018), 
investigating 
macroeconomic 
indicators 
that 
affect 
international financial centers’ performance, employing panel 
data analysis method and found the negative and significant 
effect between inflation and banks’ performance; while
Sanusi, M., Zulaikha, S. (2019), investigating the impact of 
bank-specific and macroeconomic variables on the profitability 
of Islamic rural bank (BPRS) in Indonesia from January 2010 
to December 2018 using vector error correction model and 
found the negative and insignificant relationship between 
inflation and banks’ performance.
Perry (1992) asserts that, inflation may have positive or 
negative influence on profitability subject to whether it is 
anticipated or unanticipated. Bashir 2003, and Demirguc-Kunt 
and Huizinga 1999 denote that, banks generate high profits 
during an anticipated boom when they charge high interest 
rates on loans; and if the inflation is unanticipated one, banks 
fail to adjust the rates timely, while having general price risen 
which ends to low profits and sometimes get loss. For the case 
of Tanzania, the economy with infant financial markets faces 
unanticipated inflation that ends to negative effects, so, our 
hypothesis will be: 
H
2
: Inflation Rate has Negative impact on Banks’ 
Performance. 
 
Moreover, Emase, M. A. (2017), conducted a research on the 
effect of macroeconomic factors on bank profitability for 11 
listed banks in the NSE using Panel data regression analysis 
with fixed effects, and found the positive and significant effect 
between interest rate and banks’ performance. The results 
supported by Konadu, K. A., (2016), and Kanwal, S., Nadeem, 
M., (2013), assessing the impact of macroeconomic variables 
on profitability of public limited commercial banks in Pakistan 
for the period 2001-2011empolying Pooled Ordinary Least 
Square (POLS) method found positive and significant effect 
between interest rate and banks’ performance; while Sangeetha 
R, Moorarka Chinu (2019) researching the impact of 
macroeconomic variables on the profitability of Indian 
Commercial Banks listed in NIFTY, employing Correlation 
and Multiple Regression Analysis along with descriptive 
statistics, found positive and insignificant effect between 
Interest rate and banks’ performance. Nonetheless, Sangeetha 
R, Moorarka Chinu (2019) researching the impact of 
macroeconomic variables on the profitability of Indian