Does financial development reduce poverty? Empirical evidence from Indonesia

This paper contributes to the literature by providing empirical evidence on the relationship between financial development, economic growth, and poverty in Indonesia in the period of 1980–2014. This issue is of importance for developing economies such as Indonesia given the high rate of poverty i...

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Main Authors:	Abd. Majid, M. Shabri, , Sovia Dewi, , Aliasuddin, Kassim, Salina
Format:	Article
Language:	English English
Published:	Springer 2017
Subjects:	H Social Sciences (General) HG Finance HG3691 Credit
Online Access:	http://irep.iium.edu.my/60135/ http://irep.iium.edu.my/60135/ http://irep.iium.edu.my/60135/ http://irep.iium.edu.my/60135/7/60135-Does%20Financial%20Development%20Reduce%20Poverty.pdf http://irep.iium.edu.my/60135/13/60135_Does%20Financial%20Development%20Reduce%20Poverty_scopus.pdf

id	iium-60135
recordtype	eprints
spelling	iium-601352019-08-19T02:36:34Z http://irep.iium.edu.my/60135/ Does financial development reduce poverty? Empirical evidence from Indonesia Abd. Majid, M. Shabri , Sovia Dewi , Aliasuddin Kassim, Salina H Social Sciences (General) HG Finance HG3691 Credit This paper contributes to the literature by providing empirical evidence on the relationship between financial development, economic growth, and poverty in Indonesia in the period of 1980–2014. This issue is of importance for developing economies such as Indonesia given the high rate of poverty in the country despite the rapid growth of the financial sector. The Autoregressive distributed lag (ARDL) approach to cointegration is used to examine the long-run relationship between the financial sector development and poverty, while the Granger causality based on the VECM approach is used to ascertain the direction of the causal relationship between the variables. In arriving at robust findings, we investigated two models, each using different indicators of financial sector growth, namely money supply (M2), and ratio of domestic credit to private sector to gross domestic product. The study finds that there was a long-run relationship between the financial sector, economic growth, and poverty in Indonesia, while in the short run, a bi-directional causal relationship exists between the financial sector and poverty. Based on these findings, it is recommended that in efforts to reduce poverty, the government should focus on facilitating the channelling of funds from the financial sector into specific segment of the population to ensure fair accessibility of credit, especially to the low-income group in Indonesia. Springer 2017 Article PeerReviewed application/pdf en http://irep.iium.edu.my/60135/7/60135-Does%20Financial%20Development%20Reduce%20Poverty.pdf application/pdf en http://irep.iium.edu.my/60135/13/60135_Does%20Financial%20Development%20Reduce%20Poverty_scopus.pdf Abd. Majid, M. Shabri and , Sovia Dewi and , Aliasuddin and Kassim, Salina (2017) Does financial development reduce poverty? Empirical evidence from Indonesia. Journal of the Knowledge Economy. pp. 1-18. ISSN 1868-7865 E-ISSN 1868-7873 (In Press) https://link.springer.com/article/10.1007/s13132-017-0509-6 10.1007/s13132-017-0509-6
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English English
topic	H Social Sciences (General) HG Finance HG3691 Credit
spellingShingle	H Social Sciences (General) HG Finance HG3691 Credit Abd. Majid, M. Shabri , Sovia Dewi , Aliasuddin Kassim, Salina Does financial development reduce poverty? Empirical evidence from Indonesia
description	This paper contributes to the literature by providing empirical evidence on the relationship between financial development, economic growth, and poverty in Indonesia in the period of 1980–2014. This issue is of importance for developing economies such as Indonesia given the high rate of poverty in the country despite the rapid growth of the financial sector. The Autoregressive distributed lag (ARDL) approach to cointegration is used to examine the long-run relationship between the financial sector development and poverty, while the Granger causality based on the VECM approach is used to ascertain the direction of the causal relationship between the variables. In arriving at robust findings, we investigated two models, each using different indicators of financial sector growth, namely money supply (M2), and ratio of domestic credit to private sector to gross domestic product. The study finds that there was a long-run relationship between the financial sector, economic growth, and poverty in Indonesia, while in the short run, a bi-directional causal relationship exists between the financial sector and poverty. Based on these findings, it is recommended that in efforts to reduce poverty, the government should focus on facilitating the channelling of funds from the financial sector into specific segment of the population to ensure fair accessibility of credit, especially to the low-income group in Indonesia.
format	Article
author	Abd. Majid, M. Shabri , Sovia Dewi , Aliasuddin Kassim, Salina
author_facet	Abd. Majid, M. Shabri , Sovia Dewi , Aliasuddin Kassim, Salina
author_sort	Abd. Majid, M. Shabri
title	Does financial development reduce poverty? Empirical evidence from Indonesia
title_short	Does financial development reduce poverty? Empirical evidence from Indonesia
title_full	Does financial development reduce poverty? Empirical evidence from Indonesia
title_fullStr	Does financial development reduce poverty? Empirical evidence from Indonesia
title_full_unstemmed	Does financial development reduce poverty? Empirical evidence from Indonesia
title_sort	does financial development reduce poverty? empirical evidence from indonesia
publisher	Springer
publishDate	2017
url	http://irep.iium.edu.my/60135/ http://irep.iium.edu.my/60135/ http://irep.iium.edu.my/60135/ http://irep.iium.edu.my/60135/7/60135-Does%20Financial%20Development%20Reduce%20Poverty.pdf http://irep.iium.edu.my/60135/13/60135_Does%20Financial%20Development%20Reduce%20Poverty_scopus.pdf
first_indexed	2023-09-18T21:25:14Z
last_indexed	2023-09-18T21:25:14Z
_version_	1777412147454672896

Does financial development reduce poverty? Empirical evidence from Indonesia

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