Determinants of Financial Deepening in Indonesia: Analyzing the Impact of Banking and Macroeconomic Factors

Ikbal Lutfi ()
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Ikbal Lutfi: Hasanuddin University, Economics Doctoral Program Student, Postgraduate Faculty of Economics and Business

A chapter in Proceedings of the 9th International Conference on Accounting, Management, and Economics 2024 (ICAME 2024), 2025, pp 2965-2978 from Springer

Abstract: Abstract Financial deepening plays a vital role in economic development, yet its determinants in Indonesia remain understudied. This research aims to analyze the impact of banking and macroeconomic factors on financial deepening in Indonesia. The data used in this research is quarterly data from 2019 to 2023 to examine the effect of the number of bank offices, number of deposit accounts, inflation, and interest rates (BI rate) on financial deepening. Our results indicate that the number of deposit account and inflation have significant effect on financial deepening where that the number of deposit account has no direct effect in the context of this model and inflation has negative effect on financial deepening. Meanwhile, the effects of the number of bank office and BI rate are not statistically significant, indicating that changes in these areas may not substantially affect financial deepening. These findings have significant implications for policymakers and financial institutions in fostering financial sector development in Indonesia.

Keywords: Financial Deepening; Indonesia; Banking Sector; Macroeconomic Factors (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-758-8_244

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DOI: 10.2991/978-94-6463-758-8_244

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