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Rural Bank Development and PovertyReduction in Indonesia: Evidence from Panel Co-Integration and Causality Tests

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Causal Inference in Econometrics

Part of the book series: Studies in Computational Intelligence ((SCI,volume 622))

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Abstract

The purpose of this study is to identify the possible causal links between rural bank development and poverty in provincial area of Indonesia. This study uses panel data for 27 provinces in Indonesia over the period of 2000–2013. The panel co-integration and Granger causality tests are applied to investigate the relationship between rural bank assets and regional poverty. The results of co-integration tests show that there is no long run relationship between rural bank assets and provincial poverty. Moreover, the Granger causality tests show that there is no evidence of causality relationship between provincial poverty and rural bank assets. This means rural banks still have no significant contribution to reducing provincial poverty as intended by the government.

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Notes

  1. 1.

    Indonesias stock market capitalization (% of GDP) in 2012 was 45.2 %. In the same year, the similar percentage capitalization for Singapore, Malaysia, Philippines, and Thailand was 149.8, 156.9, 105.6, and 99.2 % respectively (ADB, 2013).

  2. 2.

    Any rural banks may establish a branch office only in the same province as its head office (Bank Indonesia Regulation Number 8/26/PBI/2006 concerning Rural Banks.).

  3. 3.

    Governor of Bank Indonesias speech on Annual Banking Meeting, 2008. http://www.bi.go.id/web/en/Investor+Relations+Unit/Presentation+and+Speeches/Speeches/bankerdinner2008.htm.

  4. 4.

    Quasi money or near money is a highly liquid financial asset that do not function directly or fully as a medium of exchange but can be readily converted into currency or checkable deposit. It could be in the form of savings deposits, small-denominated (less than US$ 100,000) time deposits, or money market mutual funds held by individuals [29].

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Acknowledgments

The author wants to thank Professor Tim Maloney, Associate Professor Gail Pacheco, and Dr. Saten Kumar at the Auckland University of Technology for their useful comments and feedbacks for this paper.

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Authors and Affiliations

  1. Department of Applied Economics, Vocational School, Universitas Gadjah Mada, Yogyakarta, Indonesia

    Laksmi Y. Devi

  2. Auckland University of Technology, Auckland, New Zealand

    Laksmi Y. Devi

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  1. Laksmi Y. Devi
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Correspondence to Laksmi Y. Devi .

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Editors and Affiliations

  1. School of Knowledge Science, Japan Advanced Ins. of Sci. & Tech, Ishikawa, Japan

    Van-Nam Huynh

  2. Department of Computer Science, University of Texas at El Paso, El Paso, Texas, USA

    Vladik Kreinovich

  3. Faculty of Economics, Chiang Mai University, Chiangmai, Thailand

    Songsak Sriboonchitta

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Devi, L.Y. (2016). Rural Bank Development and PovertyReduction in Indonesia: Evidence from Panel Co-Integration and Causality Tests. In: Huynh, VN., Kreinovich, V., Sriboonchitta, S. (eds) Causal Inference in Econometrics. Studies in Computational Intelligence, vol 622. Springer, Cham. https://doi.org/10.1007/978-3-319-27284-9_40

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  • DOI: https://doi.org/10.1007/978-3-319-27284-9_40

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  • Publisher Name: Springer, Cham

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  • Online ISBN: 978-3-319-27284-9

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