Analisis Kausalitas antara Perkembangan Sektor Keuangan dengan Pertumbuhan Ekonomi di Indonesia: Analysis on The Causal Relationship between Financial Sector Development and Economic Growth in Indonesia

The study is conducted to analyze the causal relationship between the financial sector development and economic growth in Indonesia during the period of 1983.2-2000.4. The study uses three kinds of variables as proxies to the financial sector development. The causality test is done using Granger-causality test. If the estimated variables are not stationary, yet cointegrated, thus the causality test will be in cointegration framework and Vector Error Correction Model (VECM). If the estimated variables are neither stationary nor cointegrated, thus the causality test will be done using Vector Autoregression model (VAR) in the first difference. The result shows that there is a bidirectional Granger-causality in the long run between the financial sector development and the economic growth when the ratio of broad money to GDP as the proxy from the financial sector development is used. Instead, when the ratio of banking credit to GDP is used, there is a bidirectional Granger-causality in the short run. Meanwhile, when the ratio of demand deposit to narrow money is used, there is no Granger-causality relationship between the financial sector development and economic growth. Key words: Economic growth â Financial sector development -- Granger--causality test -- Vector autoregression (VAR) â Vector error correction model (VECM)â