Financial Deepening Analysis on Economic Growth in Indonesia

Abstract

Financial deepening is an effort to increase the financial sector to reduce dependence on foreign savings. Efforts are made by increasing the volume of financial institutions and the number of instruments available in the market and increasing the number of services. The purpose of this study was to determine the effect of the ratio of the money supply, the ratio of bank credit, and the ratio of domestic savings to economic growth in both the short and long term. Empirically this study uses secondary data in the form of quarterly annual data during 2008Q1-2018Q4. This study uses the Error Correction Model (ECM) method. Based on the research results, the money supply ratio variable in the short and long term has a positive and significant effect. The bank credit ratio variable in the short term has a positive and significant effect. In contrast, it has a negative and insignificant effect; the domestic savings ratio variable in the short and long term. Long has a positive and significant effect on economic growth in Indonesia.