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EFFECT OF INFLATION ON TOTAL DEPOSITS AND FINANCING OF SHARIA COMMERCIAL BANKS: A MONTHLY DATA EVIDENCE FROM INDONESIA

Ikhsan (), Cut Dian Fitri (), Hafiizh Maulana () and Khairul Amri ()
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Ikhsan: Senior Lecturer, Faculty of Economics and Business, UniversitasSyiah Kuala, Banda Aceh, Indonesia
Cut Dian Fitri: Lecturer, Faculty of Islamic Economics and Business, Universitas Islam Negeri Ar-raniry, Banda Aceh, Indonesia
Hafiizh Maulana: Lecturer, Faculty of Islamic Economics and Business, Universitas Islam Negeri Ar-raniry, Banda Aceh, Indonesia

Regional Science Inquiry, 2020, vol. XII, issue 1, 103-114

Abstract: The main purpose of the paper is to determine the effect of inflation on total deposits and the financing of sharia commercial banks in Indonesia. A monthly time series data over the period of 2012.1-2017.6 was analyzed using Johansen Co-integration test, vector error correction model, and Granger causality test. The co-integration test indicates that there is a long-run relationship between the variables. In the long-run, inflation is negatively related to total deposits and sharia financing. In the short-run, the inflation has no significant effect on the two variables. The sharia financing has a negative effect on itself at the 1 and 2-month period. The result of the Granger causality test points out that there is a bidirectional causality relationship between total deposits and sharia financing. Furthermore, unidirectional causality running from the inflation to sharia financing and from total deposits to the inflation.

Keywords: Inflation; Total Deposits; Sharia Financing; VECM; and Granger Causality Test (search for similar items in EconPapers)
JEL-codes: E31 E51 G21 N15 (search for similar items in EconPapers)
Date: 2020
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