JEFMS Journal

ABSTRACT:

Knowing which sector credit facilities can contribute to increasing economic growth in the long term in Indonesia, is the main objective of the research. This research uses secondary data as quarterly data from 2010Q1 to 2019Q4. Using the VECM approach to identify long-term effects, equipped with structural analysis to determine the response to shocks as well as the resulting contribution. Overall sectoral bank credit facilities have a significant long-term impact on GDP, it was found, though of a different nature. The positive nature of credit facilities for the agricultural sector, wholesale and retail trade sector, and the transport, warehousing and communications sectors, while credit for manufacturing, construction, and financial intermediaries had the opposite impact. A credit shock for construction and financial intermediary sector loans responded positively in the long and short term, while credit for the manufacturing sector received the largest negative response. The largest contribution to economic growth came from manufacturing sector credit, financial intermediary sector credit, agricultural sector credit, and lastly, construction sector credit. Researchers suggest increasing credit allocations to agribusiness, discount and retail exchange, and the transport and communications sectors to meet long-term goals, while in the short term, maximizing the allocation of credit between the manufacturing sector, the financial intermediaries sector, and the transport and communications sector.

KEYWORDS:

Economic Growth, Sectoral Bank Credit, Short-Term Causality, VECM

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