Abstract
Credit growth is one of the important indicators of the financial system that can drive the country economic growth, but on the other hand credit growth can also cause risks in the financial system due to the economic actors’ moral hazard. The purpose of this research is to analyze the credit procyclicality pattern and economic growth in Indonesia. In addition, this study aims to determine the relationship pattern between credit and some macroeconomic variables. The method used is VECM with quarterly time series data during 1998 until 2016. The analysis shows that credit growth and economic growth have positive causality. This shows pro-cyclicality between credit and economic growth in Indonesia. However, in the long run this pattern shows a downward trend although still positive and permanent, which means that excessive credit growth can also lead to a decline in economic growth.
Highlights
The role of banks in the economic constellation experienced very rapid dynamics parallel with technological and information advances and even unlimited financial mobility in the space and time dimensions
Important preestimation tests consist of data stationary test, cointegration test, optimum lag test, impulse response function (IRF) and variance decomposition (VD)
Based on the analysis results can be concluded that there is a pattern of credit pro-cyclicality and economic growth in Indonesia where credit growth shows a pattern in same way with economic growth
Summary
The role of banks in the economic constellation experienced very rapid dynamics parallel with technological and information advances and even unlimited financial mobility in the space and time dimensions. Changes in the structure of banking become own concentration for the economy of a country, especially for developing countries as an economic support. A 351 smooth and strong financial structure is assumed to have an impact on economic stability and can be an indicator of economic growth especially for developing countries (Korkmaz, 2015). Banking economically plays a role in facilitating the funds operation especially on borrowing so that will lead to increased investment. JURNAL EKONOMI KUANTITATIF TERAPAN Vol 14 No 2 ▪ AGUSTUS 2021 stability is a key instrument in the economic stability. This condition is based the emergence of macro economy and banking policy mix. The banking role has decreased confidence due to the global financial crisis phenomenon in 2008 which led to inefficiency and resulting in economic doubts about the role of banks
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