The Dynamics of Credit Procyclicality and Stability of Macroeconomics in Indonesia

  • Ni Putu Nina Eka Lestari Undiknas University
  • Made Kembar Sri Budhi Udayana University
  • I Ketut Sudama Udayana University
  • Ni Nyoman Reni Suasih Udayana University http://orcid.org/0000-0002-1992-4540
  • I Nyoman Taun Undiknas University

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.

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Published
2021-08-23
How to Cite
LESTARI, Ni Putu Nina Eka et al. The Dynamics of Credit Procyclicality and Stability of Macroeconomics in Indonesia. Jurnal Ekonomi Kuantitatif Terapan, [S.l.], p. 351-368, aug. 2021. ISSN 2303-0186. Available at: <https://ojs.unud.ac.id/index.php/jekt/article/view/74440>. Date accessed: 24 jan. 2022. doi: https://doi.org/10.24843/JEKT.2021.v14.i02.p07.