The Contributions of Savings and Loans on GDP Growth : The Case of Indonesia

The capital consists of savings, loans, FDI, and DDI and is important production factors. The contribution of savings and loans are estimated using panel regression and Generalized Method of Moment (GMM). The results show that savings and loans (investment, working capital, and consumption) have significant effect on economic growth with the respective negative and positive effects. Moreover, FDI, DDI, School Enrollment Rate, and Population Growth also play a significant role on growth with distinctive coefficient describing respective effects for each variable on growth. Furthermore, sector-specific analysis gives very dynamic effects on growth in the case of Indonesia. In order to identify long-run bidirectional relationship between variables, we employ Granger Causality Test using Vector Error Correction Model (VECM). As presents in the result and analysis, only loan for consumption performs causal relationship with GDP growth during the period