Analysis Of The Effect Of Realization Of Investment Credit In The Agriculture, Industry And Services Sector On The Amount Of Money Supply In Indonesia

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Analysis of the Effect of Realization of Investment Credit in the Agriculture, Industry, and Services Sector on the Amount of Money Supply in Indonesia

Introduction

The banking sector plays a vital role in the economy of a country, including Indonesia, which is a developing nation. Through the intermediation function, banks can significantly impact economic activity by providing credit to the public. The more credit provided by banks, the greater the funds that can be utilized by the community to increase economic activities. This study aims to analyze the effect of the realization of investment loans in the agricultural, industrial, and service sectors on the amount of money supply in Indonesia.

Background

The Indonesian economy is a mixed economy that consists of various sectors, including agriculture, industry, and services. The agricultural sector is a significant contributor to the country's economy, providing food security and raw materials. The industrial sector, on the other hand, has great potential in improving the economy, but its growth is influenced by various factors such as efficiency, investment in technology, and government policies. The service sector, including tourism, transportation, and trade, is growing rapidly and creating large added value in the digital era and globalization.

Methodology

This study uses monthly time series data from 2005 to 2006 to analyze the effect of the realization of investment loans in the agricultural, industrial, and service sectors on the amount of money supply in Indonesia. The Ordinary Least Squares (OLS) method is applied to estimate the existing model. The study has three independent variables: the realization of the Agricultural Sector Investment Credit (X1), the Industrial Sector (X2), and the Service Sector (X3), as well as one dependent variable: the amount of money supply (Y).

Results

The results of this study show that the realization of investment credit in the agricultural sector and the service sector has a significant influence on the money supply. Conversely, the realization of credit in the industrial sector does not show a significant effect on the amount of money supply.

Deeper Analysis

It is essential to understand why the agricultural and service sector has a significant impact on the money supply. The agricultural sector, as a sector that supports food security and the supply of raw materials, greatly contributes to the Indonesian economy. When banks provide investment loans to farmers or business actors in the agricultural sector, they will be able to increase production, which will then contribute to economic growth. The results of this sector will create jobs and increase people's purchasing power, which in turn will contribute to an increase in the amount of money supply.

On the other hand, the service sector, including the tourism, transportation, and trade sectors, also plays an important role in the modern economy. In the digital era and globalization, the service sector is growing and able to create large added value. Credit given to business actors in the service sector allows them to invest and innovate, which in turn will increase the demand and circulation of money in the community.

However, this is not the case with the industrial sector. Although this sector has great potential in improving the economy, factors such as the level of efficiency, investment in technology, and government policies are also very influential. The inability of the industrial sector to show a significant effect on the money supply can be caused by various factors, including slowing growth, market uncertainty, and strict monetary policy.

Conclusion

In conclusion, it is essential for the government and banks to focus more on strengthening sectors that are proven to contribute significantly to the amount of money supply. By strengthening the agricultural sector and services through supporting policies, it is hoped that there will be an increase in the money supply that can encourage overall economic growth in Indonesia.

Recommendations

Based on the findings of this study, the following recommendations are made:

  1. Strengthen the agricultural sector: The government and banks should provide more support to the agricultural sector by providing investment loans to farmers and business actors. This will help increase production, create jobs, and increase people's purchasing power.
  2. Support the service sector: The government and banks should also provide more support to the service sector by providing investment loans to business actors. This will help increase the demand and circulation of money in the community.
  3. Improve the industrial sector: The government and banks should also focus on improving the industrial sector by providing investment loans to business actors. This will help increase efficiency, investment in technology, and government policies.
  4. Monitor and evaluate: The government and banks should continuously monitor and evaluate the impact of their policies on the money supply and economic growth.

By implementing these recommendations, it is hoped that there will be an increase in the money supply that can encourage overall economic growth in Indonesia.
Frequently Asked Questions (FAQs) on the Analysis of the Effect of Realization of Investment Credit in the Agriculture, Industry, and Services Sector on the Amount of Money Supply in Indonesia

Q: What is the main objective of this study? A: The main objective of this study is to analyze the effect of the realization of investment loans in the agricultural, industrial, and service sectors on the amount of money supply in Indonesia.

Q: What are the independent variables used in this study? A: The independent variables used in this study are the realization of the Agricultural Sector Investment Credit (X1), the Industrial Sector (X2), and the Service Sector (X3).

Q: What is the dependent variable used in this study? A: The dependent variable used in this study is the amount of money supply (Y).

Q: What is the methodology used in this study? A: The methodology used in this study is the Ordinary Least Squares (OLS) method to estimate the existing model.

Q: What are the results of this study? A: The results of this study show that the realization of investment credit in the agricultural sector and the service sector has a significant influence on the money supply. Conversely, the realization of credit in the industrial sector does not show a significant effect on the amount of money supply.

Q: Why does the agricultural sector have a significant impact on the money supply? A: The agricultural sector has a significant impact on the money supply because it supports food security and the supply of raw materials, which greatly contributes to the Indonesian economy. When banks provide investment loans to farmers or business actors in the agricultural sector, they will be able to increase production, which will then contribute to economic growth.

Q: Why does the service sector have a significant impact on the money supply? A: The service sector has a significant impact on the money supply because it is growing rapidly and creating large added value in the digital era and globalization. Credit given to business actors in the service sector allows them to invest and innovate, which in turn will increase the demand and circulation of money in the community.

Q: Why does the industrial sector not have a significant impact on the money supply? A: The industrial sector does not have a significant impact on the money supply because factors such as the level of efficiency, investment in technology, and government policies are also very influential. The inability of the industrial sector to show a significant effect on the money supply can be caused by various factors, including slowing growth, market uncertainty, and strict monetary policy.

Q: What are the implications of this study? A: The implications of this study are that the government and banks should focus more on strengthening sectors that are proven to contribute significantly to the amount of money supply. By strengthening the agricultural sector and services through supporting policies, it is hoped that there will be an increase in the money supply that can encourage overall economic growth in Indonesia.

Q: What are the recommendations of this study? A: The recommendations of this study are:

  1. Strengthen the agricultural sector: The government and banks should provide more support to the agricultural sector by providing investment loans to farmers and business actors.
  2. Support the service sector: The government and banks should also provide more support to the service sector by providing investment loans to business actors.
  3. Improve the industrial sector: The government and banks should also focus on improving the industrial sector by providing investment loans to business actors.
  4. Monitor and evaluate: The government and banks should continuously monitor and evaluate the impact of their policies on the money supply and economic growth.

By implementing these recommendations, it is hoped that there will be an increase in the money supply that can encourage overall economic growth in Indonesia.