Credit Depth on Indonesian Regional Economic Development

From regional perspective, the role of banks credit is important to encourage the economic real sectors. Local government spending aimed to enhancing regional economic growth, if supported by adequate banks credit will encourage regional economic growth. Using VAR model revealed that provinces showed different responses to the causality between credit depth and regional economic growth. Panel data analysis revealed, there is a positive relationship between regional credit depth and real regional economic growth percapita, and 68 percent of real regional economic growth percapita can be explained by credit depth. Increasing credit depth by 1 basis point will increase regional economic growth by 0.03 basis points. Furthermore, increasing credit depth by 1 basis point in t-1, will reduce regional poverty by 0.16 basis points in period t. The model showed that 23 percent of the variance of poverty can be explained by credit depth in the previous year. Keywords: credit depth, economic growth, regional economic developmentJEL Classification: E61; G28; O2

Determination of Monetary Transmission through the Types of Credit on Economic Growth

Banks credit by usage (working capital, investment and consumer credit) and by economic sectors (agricultural, mining, industrial, trade and services) on Indonesian economic growth explainedthe role of banks credit as a monetary transmission channel. Banks credit for investment, agricultural, industrial, trade and services, have a significant effect on economic growth. Thus, as a growth accelerating factor, investment credit aimed to financing agricultural, industrial, trade and services areable to promote qualified growth of Indonesian economy as well as reducing unemployment rate. This study uses bankscredit data by usage, economic sectors, economic growth and unemployment rate in the period of 1991-2014. Model estimation on the relationship between banks credit by usage on economic growth and unemployment using ECM (Error Correction Mechanism) model, while the relationship between banks credit by economic sectors oneconomic growth using in–difference regressionon OLS (Ordinary Least Square) model.Credit depth as the ratio between banks credit and economic growth is only appropriate for the analysis of banks credit relationship usage on economic growth, while by economic sectors, their role depend on the magnitude of credit portfolio to total banks credit.Keywords: credit by economic sectors; credit by usage; economic growthJEL Codes: E6, O2, O

Economic Convergence across the Toba Lake Region

AbstractBased on the economic sectors, seven districts across the Toba Lake Region (TLR) has similar patterns in economic development – agriculture, trade and construction are dominant economic sectors, however, there is an unconvergence economic growth across the TLR. It was found that the relationship between economic growth and unemployment in Toba and Dairi, and between economic growth and poverty in Toba, Dairi and Humbang can not be explained due to insignificant coefficient between economic growth to unemployment and poverty. Economic growth is not strong enough to reduce unemployment and poverty. It needs higher economic growth to influence of reducing both unemployment and poverty. In this case, dominant economic sectors in each district need a serious attention to promote higher growth that could significantly reduce unemployment and poverty. The highest strength of economic growth in reducing unemployment occurred in Simalungun which increasing economic growth by 1 per cent could reduce unemployment by 3,021 per cent, where in North Tapanuli, increase in economic growth by 1 per cent could reduce poverty by 4,534 per cent. Thus, the integration policies through prioritization of economic key drivers based on absolute advantage of each economic sector across the TLR is needed.Key words: economic convergence, economic growth, unemployment, povertyJEL Classification: O11; O2

Monetary Transmission through Rural Banks on Economic Development

This study aims to measure the role of BPRs in monetary transmission to MSMEs, especially in Municipality and District of Bogor that geographically bordering directly. Determination of these two areas is intended to understand the credit depth of BPRs in relation to regional economic growth, and the results are expected to avoid economic disparity in both regions. This study used VECM model to measure the causality between credit depth and economic growth, and OLS to measure the relationship between poverty to unemployment and credit depth. The VECM model showed uncertainty of Granger's causality between credit depth and economic growth. This explained that it takes higher credit depth of BPRs to promote economic growth. For Municipality of Bogor, changed of credit depth by 1 basis point, reduce poverty by 3.51 basis points, and changed in unemployment by 1 basis point, change poverty in the same direction by 0.09 basis points. Meanwhile, in District of Bogor, changed of credit depth by 1 basis point, reduce poverty by 6.95 basis points, and changed in unemployment by 1 basis point, change poverty in the same direction by 0.26 basis points. Keywords: monetary transmission, MSMEs, rural banks, povertyJEL Classification: E50; G21; R5

The Effect of GRDP Sector Composition on Economic Growth in the Lake Toba Region

This study aims to analyze the effect of 17 economic sectors on economic growth in the Lake Toba Region (KDT). The data used is secondary data in the form of times series from 2010 to 2019 with panel data analysis using Fixed Model Effect (FEM). It shows a positive and significant influence between mining, energy, information, finance, and health sectors on KDT economic growth, while the other 12 economic sectors have no significant effect. An increase of 1 percent in the mining sector will incline economic growth by 1.41 percent; the energy sector will promote economic growth by 0.48 percent; the information sector will increase economic growth by 0.81 percent; the financial sector will increase economic growth by 0.78 percent; and the health sector will enhance economic growth by 1.10 percent. The government should make policies related to production and investment enhancement so that the income of each economic sector and economic growth in KDT increases. Keywords: Economic growth, Economic sector, Panel dataJEL Classification: C01, C33, O1

Effects of Credit on Economic Growth, Unemployment and Poverty

Abstract               Effect of credit on economic growth, unemployment and poverty provides evidence from Indonesia on the role of banks credit for promoting economic growth and reducing both unemployment and poverty.  To document the link between banks credit and economic growth, we estimate a VAR model and variance decompositions of annual GDP per capita growth rates to examine what proxy measures of banks credit are most important in accounting for economic growth over time and how much they contribute to explaining economic growth.  We also estimate an ECM to document the relationship between banks credit to both unemployment and poverty.  This paper revealed bi-direction causality between banks credit and economic growth.  Banks credit promotes economic growth and economic growth affects credit depth and financial development.  Furthermore, banks credit is a growth accelerating factor on Indonesian economic growth.  Banks credit is an endogenous growth and a good predictor on Indonesian economy. Our estimation model explained that credit allocated by banks increases business escalation to the real sectors then promotes economic growth, decreases unemployment rate through increasing in labor demanded, increases income and then decrease poverty.  This overall transmission mechanism just occurred through presence of banks credit by increasing money supply to the real sectors, promotes growth and social welfare.   Keywords :  banks credit, economic growth, growth accelerating factor, poverty, unemployment   JEL Classification : E51, E52, E5

PERSOALAN-PERSOALAN PERBANKAN INDONESIA

xiii,; 250 hlm,; 21 c

Persoalan-persoalan perbankan Indonesia

Mengenal dan memahami bisnis perbankan Indonesia merupakan bagian yang tidak dapat dipisahkan dari mengenal dan memahami perekonomian Indonesia. Kestabilan perbankan dan kestabilan perekonomian sangat erat kaitannya. Dengan demikian, peran yang diemban oleh lembaga perbankan sangat besar sehingga sangat sulit untuk mengharapkan pertumbuhan ekonomi yang baik tanpa didukung lembaga perbankan

Linkage of Credit on BI Rate, Funds Rate, Inflation and Government Spending on Capital

Linkage of credit on BI rate, funds rate, inflation, and government spending on capital provides evidence from Indonesia.  This paper found advance explanation about banks credit as monetary transmission channel and its role on Indonesian economy.  We used credit depth as a ratio of banks credit to GDP nominal, to explain the role of credit in Indonesian economy.  We developed a VAR model to measure the response of credit to BI rate, funds rate and inflation rate, and OLS method to find out how banks credit response to government spending on capital. This paper revealed bi-direction causality between credit and BI rate, credit and funds rate, and credit and inflation.  There is trade-off between credit and BI rate, credit and funds rate, and credit and inflation, but government spending on capital promotes credit depth.  We found that Indonesian banking is bank view, allocated their credit based on their performance, not merely on the monetary policy determined by central bank.  For bank view perspectives, we analyzed the link between LDR as an indicator of credit channel mechanism to NPLs and CAR.  We found that there is no significant effect of CAR to LDR, but has a strong negatively relationship between NPLs to LDR.  This evidence indicates that commercial banks in Indonesia allocated their credit do not related to their capital but merely to the quality of their credit portfolio.</p