The Role of Banking, Agriculture and Industrial Sector in Economic Growth in Indonesia

Abstract

Whether financial structure influences economic growth is still considered a crucial policy issue. The aims of this research are to analyze the influence of banking development indicators, agriculture sector and industrial sector on economic growth in Indonesia and to examine the relationships between banking development and economic growth. VAR, a time-series econometric model used in this study, estimating three banking indicators that are assets, credits and third party fund, economic growth average per capita at constant price 2000 and two variables of economic growth in agriculture and industry. Two dummy variabels are also implemented in VAR model, they are monetary crisis and implementation of Arsitektur Perbankan Indonesia (API) or Indonesia Banking Architecture. Based on the two-stage data processing, the research reveals empirical evidence that banking development, agriculture sector and industrial sector affects the economic growth although the percentage of the contribution are relatively small.