The Effect of Interest Rates on the Financial Cycle in Indonesia

摘要

The purpose of this study is to determine the relationship between interest rates and the pressure on the movement of the financial cycle in Indonesia. This study uses secondary data from Bank Indonesia from 1990 to 2017, data is processed using Simultaneous Equation Model. The results of this study found that interest rates have a positive and significant impact on the financial cycle, with a pressure of 0.72 to - 23.92 Amplitude. The renewal of this research shows that short-term interest rates are very effective for economic growth, and long-term interest rates can make pressure on the financial cycle in Indonesia.