International Conference on The 10th Anniversary of Intercafe Collaborated with PGN

Analysis the Impact of Financial Inclusion on Financial Stability in Asia

Azka Azifah Dienillah and Lukytawati Anggraeni
Bogor Agricultural University, Lingkar Akademik street, Kampus IPB Darmaga,
Bogor 16680, West Java, Indonesia
ABTRACT
Financial inclusion is one of many strategies to increase inclusive growth in Asian countries.
However, it can cause either stability or instability in the financial system. Therefore, this
research aimed to analyze the relationship between financial inclusion and financial stability
and to analyze factors that affect the stability of the financial system in seven Asian countries
in the periode of 2007-2011. The methods used are Pearson correlation and Fixed Effect
Model. The results show that there is negative correlation at 5% significant level between
financial inclusion and financial stability. Factors that significantly affect the financial
stability are financial inclusion, financial stability in the previous period, non-FDI capital
flows to GDP, the ratio of current assets to deposits and Short-term funding, and GDP per
capita. Thus the increase in financial inclusion, current assets of banking, GDP per capita,
and the portfolio investment can become the strategies to improve the financial stability
(Bank z score) on the determined and future year.
Keywords: Bank z score, FEM, Financial Inclusion, pearson correlation, SME outstanding
loan.
1.

INTRODUCTION

Inclusive growth or overall growth is one of the important goals of economic policies in
the world, especially in Asia. Its due to the inequality of income increases every year on
average. Data from UNCTAD shows that the Gini index of Asia in 1980-2010 had an
increasing trend with an average annual growth rate is 3.03% [1]. The increasing of Gini
index in Asia foster the implementation of a strategy to boost inclusive growth by the
promotion of financial inclusion. Financial inclusion is the entire effort to improve people's
access to financial services by eliminating all forms of barriers [2].
The programs of financial inclusion in Asia began to intensively conducted in the last
decades. The increasing focus on greater access to the unbankable public or people who have
not been able to enjoy the services of formal financial institutions such as banks because
there are barriers to access. According Kunt et al (2008), many barriers to access banking
services can be caused by the bank's business model, market position, the level of
competition, macroeconomic conditions, as well as agreements and regulations that run [3].
Such constraints make the growth of financial inclusion in Asia relatively low.

Source: World Bank (2011) in Sarma (2012)

Figure 1 Financial Inclusion Index for Seven Asian Countries in 2005-2009
Figure 1 shows that financial inclusion in some Asian countries have an increasing
trend on the average with a 2.19% average growth rate from 2005 to 2009. The country that
has the highest index of financial inclusion is South Korea with an average growth rate of
0.83%. The South Korean people have high access on financial services due to South Korea
has low level of barrier to access. Meanwhile, Indonesia which has the financial inclusion
growth rate of 1.93% has the lowest index of financial inclusion among the seven countries
due to the relatively low access of financial services in Indonesia and the barriers are quite
high. According to research by Camara and Tuesta (2014), South Korea obtains the first rank
for accessing financial services category, while Indonesia is in rank 61 out from 82 countries
and for the devoid of barriers to access financial services category, South Korea obtains rank
14 and Indonesia is rank 71 [4]. This is also evidences by data from the World Bank (2011),
South Korea has high percentage of an account ownership at a formal financial institution for
the age above 15 years, reaching 93% and Indonesia only 20% and the percentage of loans
amounting was 17% for South Korea and 9% for Indonesia [5].
Hannig and Jansen (2010) stated that the provision of financial services should be much
given to low-incomed groups because they can increase the stability of the economy [6].
However Dupas et al (2012) who conduct research on Kenya, got a different results that the
increase in banking services do not cause an increase in financial stability [7]. This is because
the increase of banking services is not followed by a decrease in the cost of borrowing for the
lower middle class, lack of confidence, and is not followed by an increase in service quality.
Based on Figure 2, from seven Asian countries (South Korea, Turkey, Thailand,
Malaysia, Indonesia, India, and Bangladesh) increasing on financial inclusion which is
proximated by ratio of SMEs outstanding loans to total outstanding loans in the commercial
bank (smel) is followed by increasing in the financial stability. It is marked by a decline in
non-performing loan (NPL). However, the increase in the value of financial inclusion is
followed by a decline in the value of Bank z score (BZS) which means creating instability in
the financial system. There is financial instability likelihood in some Asian countries in 20072011 since financial inclusion programs, it would require further research for Asian countries
that have made financial inclusion as a strategy for inclusive growth.

Source: Calculating from World Bank (2013)

Figure 2 Correlation between financial inclusion (SMEL) and financial stability (BZS and
NPL) for seven Asian countries in 2007-2011.
Because there is some possibilities of instability in financial system as a result of the
financial inclusion programs, it would require further research to Asian countries that have
made financial inclusion to be one of strategies for inclusive growth. So based on the brief
description above, there are several issues to be addressed in this research:
1. How is the correlation between financial inclusion and financial stability in several Asian
countries in 2007-2011?
2. What is the impact of financial inclusion and other factors on financial stability in several
Asian countries in 2007-2011?
Based on the description above, the purpose of this research is:

1. To analyze the correlation between financial inclusion and financial stability in several
Asian countries in 2007-2011.
2. Analyze the impact of financial inclusion and other factors that affect financial stability in
several Asian countries in 2007-2011.

2.
2.1.

METHODOLOGY
Types and Sources of Data

The data used is the panel data, a joint between cross section and time series data. The
cross section data consist of seven countries in Asia (South Korea, Malaysia, Indonesia,
India, Bangladesh, Thailand, and Turkey) and the annual time series data in 2007-2011
period. The data used in this research are secondary data which is an annual. These data were
collected from references such as the World Bank, the International Monetary Fund (IMF)
database, and other sources. Information about data, unit, and sources used are shown in
Table 1. Furthermore, to support the literatures as well as the insight, the authors use
additional literatures obtained from books, journals, and other scientific researches.
Table 1. Information about Data, Unit, and Sources
Data
SME (small medium enterprises)
outstanding loans in commercial bank

Unit
USD

Source
IMF

Total outstanding loans in commercial

bank

USD

World Bank

Non-performing loan to gross deposit

World Bank

Bank z score

Indeks

World Bank

GDP per capita

USD /capita

World Bank

Ratio of private credit to GDP

World Bank

Ratio of non-capital FDI capital flow to

GDP

Indeks

World Bank

Financial Openness

Indeks

Chinn-Ito
database

Ratio of current assets to deposits and

short-term funding

World Bank

2.2.

Data Processing Methods

2.2.1. Correlation
In order to see the closeness of the linear relationship between financial inclusion and
financial stability, the coefficient of Pearson correlation is used as follows:

r=
Where:
x: The ratio of outstanding loan on small and medium enterprises to total outstanding loans in
the commercial banks as financial inclusion proxy.
y: Bank Z score or NPL as financial stability proxy.
2.2.2 Regression
The equations model that is used in this research adopted Pontines and Morgan model (2014)
[8]. The model is written as follows:
Finstabi,t = b1Finstabi,t-1+b2(Fininclusioni,t )+ b3LGDPPi,t + b4CGDPi,t + b5LIQi,t + b6NFDIi,t +
b7OPNSi,t + ei,t
Where:
Finstabi, t: Proxy for the financial stability are represented by Bank variable Z score (BZS)
and non-performing loan (NPL) for country i year t (BZS: Index; NPL:%).
Finstabi, t-1: Proxy for the financial stability are represented by Bank variable Z score (BZS)
and non-performing loan (NPL) for country i year t-1 (BZS: Index; NPL:%).
Fininclusioni, t: Proxy for financial inclusion is represented by the ratio of the small and
medium enterprises outstanding loan to total outstanding loans in commercial banks (smel)
for country i year t (Index).
LGDPPi, t: LN GDP per capita for country i year t (Index).
CGDPi, t: The ratio of private credit from bank deposits and other financial institutions to
GDP for country i year t (%).
Liqi, t: Current assets to deposits and short-term financing for country i year t (%).
NFDIi, t: Non-FDI capital flows to GDP for country i year t (Index).
OPNSi, t: financial openness index (financial openness) for country i year to t (Index).
2.2.3. Panel Data Regression
Panel data is a combination of cross section data with time series data. Regression analysis
can be used to see the mathematical relationship between independent variables and
dependent variable in the panel data [9]. Step of panel data analysis is presented in Figure 3.

Model formulation

Estimation model selection

Chow test

Pooled Least Square

LM test

Hausman test

Fixed Effect

Random Effect

Criteria test

Econometrical test

Statistical test

Economy test

Estimated results test

Figure 3. Step of panel data analysis

3. RESULT
Based on the calculation of the average value from the dependent and independent
variables for seven Asian countries in 2007-2011, the value obtained as follows:
Table 2. Average value of variables for seven Asian Countries in 2007-2011
Negara
South Korea
Malaysia
Thailand
Indonesia
India
Bangladesh
Turkey
Averages

BZS

NPL

SMEL LGDPP CGDP

LIQ

NFDI

OPNS

8.473
29.83
5.883
2.654
40.26
6.492
5.693
14.18

0.586
4.194
5.14
3.031
2.484
10.79
3.56
4.255

0.451
0.168
0.375
0.23
0.123
0.223
0.236
0.258

9.52
37.42
18.03
30.94
9.842
17.6
17.13
20.07

-1950
24.392
14 630
99 126
225 175
789 762
-3 822
160 421

0.531
0.368
0.212
0.638
0.163
0.163
0.392
0.352

9.978
9.023
8.374
7.818
7.113
6.526
8.961
8.256

99.284
101.96
114.95
25.177
44.387
38.808
34.305
65.553

Source : Calculating from World Bank, IMF (2013)

Table 2 shows that South Korea has the most stable financial system characterized by
the lowest NPL ratio to GDP out of seven Asian countries. While Bangladesh has the lowest
level of financial stability with the highest NPL ratio. Indonesia is the third rank for the
stability of the financial system from seven Asian countries with a relatively low in NPL ratio
which means that financial stability of Indonesia is relatively good.
Financial Stability in India based on Bank Z Score Indicator has the highest value. Its
due to India has good stability in return on asset of banking sector [15]. While Indonesia has
the lowest financial stability because financial stability in Indonesia tend to more fluctuate
than the others. Either Bank Z score or NPL as financial stability proxy are influenced by

several variables based on Morgan and Potines research (2014) [8]. There are GDP per
capita, private credit from bank deposits and other financial institutions, banking current
assets, non-FDI capital flows, and financial openness.
The highest value of the average ratio of SME outstanding loans to total outstanding
loans in commercial banks (smel) as a proxy for financial inclusion is owned by South Korea
which also has the lowest NPL value. While India is the country with the lowest smel value,
but it has the highest BZS value. This indicates that South Korea has the high level of
financial inclusion followed by the high level of financial stability, but financial inclusion and
financial stability does not show the existence of a positive relationship in India.
South Korea has the highest value of SME outstanding loans to total outstanding loans
in commercial banks (smel) because South Korea has special regulations which have goal to
increace SME growth like protection and promotion, domestic-demand-oriented, and direct
SME assistance [16]. India has the lowest value of SMEL due to India has constrain to access
financial services. For example there is high transaction cost to get credit so most of SME
get capital from non-formal financial services or from their saving account. Beside that
condition, Indian people has low management skill for their limited capital [10].
From seven countries, South Korea which has the highest average GDP per capita in
2007-2011 is the country that has the lowest NPL. Meanwhile Bangladesh with the lowest
GDP per capita is the country with the largest NPL ratio. GDP per capita in Indonesia is
relatively low but also has relatively low level of NPL ratio. These indicates that country with
high level of GDP per capita has a good financial stability, while country with low level of
GDP per capita has a low level of financial stability.
The highest ratio of private credit from bank deposits and other financial institutions to
GDP (CGDP) is owned by Thailand. This is due to the low barriers to enjoy financial
services such as credit [9]. The lowest CGDP is owned by Indonesia due to high level of
credit constraints and the high number of people who are unbankable [10]. Both Thailand and
Indonesia, which has the highest and the lowest CGDP, have relatively low at Bank Z score
and relatively high at NPL ratio.
The highest value of the average current ratio of banking assets to deposits and shortterm financing (LIQ) is owned by Malaysia which also has a relatively good level of financial
stability. This is illustrated by the relatively low at NPL ratio and high level of BZS in
Malaysia. Indonesias LIQ is in the second rank with a relatively high value, but the level of
financial stability in Indonesia is relatively low. Meanwhile, South Korea has the lowest LIQ
with a relatively good stability of the financial system because of the low value of NPLs but
the BZS is slightly below of average.
The highest ratio of non-FDI capital flows to GDP (NFDI) per capita is owend by
Bangladesh that has a relatively low level of financial stability due to a relatively high level
of NPL but relatively low at BZS. While the lowest NFDI owned by Turkey which has a
relatively good financial stability by BZS indicator but Turkey has a high NPL ratio.
Indonesia is at third rank for NFDI because Indonesia has a relatively low financial stability
by BZS indicator.
The last variable is the financial openness (OPNS). Country with the highest levels of
OPNS is Indonesia with a relatively high NPL and a relatively low BZS. While India and
Bangladesh which have the smallest OPNS value, the level of India's financial stability is
very different compared to Bangladesh. India has a high level of BZS and low level of NPL
which means the stability of India's financial system is relatively good. Contradictory to
India, even though Bangladeh has the same value of OPNS, Bangladesh has a relatively low
BZS but a relatively high NPL ratio just like Indonesia. This indicates countries which have
high or low OPNS do not have consistency in the condition like the said three countries.

3.1.

The Relation of Financial Inclusion and Financial Stability

The relationship between financial inclusion and financial stability must be in synergy
so the increasing in financial inclusion able to boost the financial stability. Based on pearson
calculation, the correlations of Bank's Z score, NPL, and the ratio of SME outstanding loans
to total outstanding loans in commercial banks are showed in table 3.
Table 3 Correlation between dependent dan independent variables
Variabel

BZS

NPL

SMEL

BZS

1.000000

-0.224650

-0.578062

NPL

-0.224650

1.000000

-0.246044

SMEL

-0.578062

-0.246044

1.000000

Source : Calculating from World Bank, IMF (2013)

Table 3 shows that there is a positive correlation between the variables of financial inclusion
(SEML) the Bank Z Score that is a proxy for the financial stability. Correlation or the
closeness degree of the linear relationship between two variables is medium due to the
correlation value 0.4 <| r | <0599 [11]. This value is significant at the 5% level due to | t-test |
(-4069) t-table (1.96).
3.2.

Factors that Influence Financial Stability

Based on statistical test using regression models with Fixed Effect approach and weighted
least squares estimation method obtained the following results:
Table 4 The model estimation for the impact of financial inclusion on financial system
stability

Variable

Coefficient

Std. Eror

t-Statistics

Prob.

1.221192

1.631314

0.748594

0.4665

AR(1)

0.406410

0.057548

7.062078

0.0000***

SMEL

10.33174

1.203799

8.582612

0.0000***

LGDPP

1.234364

0.489634

2.520995

0.0245**

CGDP

-0.019332

0.025373

-0.761907

0.4588

LIQ

0.116698

0.052962

2.203415

0.0448**

NFDI

6.60E-07

2.23E-07

2.960921

0.0103**

OPNS

-1.088197

0.705036

-1.543462

0.1450

R-squared

0.998421

Adjusted R-squared

0.99695

Sum squared resid weighted

16.12812

Sum squared resid unweighted

33.60968

Durbin-Watson stat

2.43691

Prob (F-statistic)

0.00000

*** : Significant level of 1%, ** : Signifiant level of 5%, * : Significant level of 10%.
Table 4 shows that the variables that significantly affect financial stability are the
stability of the financial system in the previous period (AR (1)), the ratio SMEs outstanding
loans to total outstanding loans in commercial banks (smel), GDP per capita (LNGDPP), the
ratio of current assets to deposits and short-term funding (LIQ), non-FDI capital flows to
GDP (NFDI). While the variables that do not significantly affect financial stability are ratio
of private credit to GDP (CGDP) and Financial Openness (OPNS).
3.2.1. Financial Stability in the Previous Period (AR (1))
The financial stability in the previous period (AR (1)) has a positive and significant
relationship at the level of 1% with the stability of the financial system. The increasing in AR
(1) will increase the financial stability. This indicates the financial stability in the previous
period affects the financial stability in the t period. Research by Pontines Morgan (2014) also
gives the same result with a significance level at 1% [8].
3.2.2. Ratio of SME outstanding loans to total outstanding loans at Commercial Bank (smel)
Ratio of SME outstanding loans to total outstanding loans at Commercial Bank (smel) has a
positive and significant relationship at 1% level with financial stability. This indicates an
increasing in smel will also increase financial stability due to smel increasing will strengthen
the real sector. In addition, the increasing will be followed by strengthening in base deposit of
SME that can be used to improve the process of intermediation [12]. Morgan and Pontiness
research (2014) [8] on the relationship of financial inclusion and financial stability in middleincome countries also provides similar results at 10% level.
3.2.3. GDP per capita (LNGDPP)
GDP per capita (LNGDPP) has a positive and significant relationship at 5% with the financial
stability. This indicates that an increasing in GDP per capita will also increase the stability of
the financial system due to increasing in GDP per capita will lead to an increase in formal
accounts in the banking sector [13]. Increasing in formal account will also increase the base
deposit and improve the intermediation process. Research by Morgan and Pontines (2014) [8]
also gives the same result with a significance level of 1%.

3.2.4. Non-FDI Capital Flow to GDP (NFDI)

Non-FDI capital flows to GDP (NFDI) has a positive and significant relationship at 5% with
financial stability. This indicates that an increasing in NFDI will increase the stability of the
financial system. This is because NFDI will increase bank deposit so that credit will also
increase. Additionally, NFDI can increase foreign exchange reserves to the capital purposes
state [13]. These results is same with the results of research conducted by Lane (2006) [14].
3.2.5. Ratio of Current Assets to Deposits and Short Term Funding (LIQ)
The ratio of liquid assets to deposits and short-term funding (LIQ) have a positive and
significant relationship at 5% with the stability of the financial system. This indicates that an
increasing in the LIQ will increase the stability of the financial system due to an increasing in
current assets will increase customer confidence in a bank when there is a shock [8].
Research by Morgan and Pontines (2014) also gives the same result with a significance level
of 1% [8].
4. CONCLUSIONS AND RECOMMENDATIONS
4.1. Conclusion
1. Correlation between financial inclusion and financial stability in Asia showed a weak
linkage if using NPL indicator as a financial stability proxy, but relatively strong if using
Bank indicator Z score.
2. Factors that significantly affect the stability of the financial system (BZS) in Asia based on
data from seven countries in 2007-2011 are the stability of the financial system in the
previous period (AR (1)), financial inclusion (smel), GDP per capita (LNGDPP), non-FDI
capital flows to GDP (NFDI), and the ratio of current assets to deposits and short-term
funding (LIQ). All five variables have positive and significant relations to financial stability
(BZS).
4.2.Suggestion
1. Increasing on financial inclusion (the ratio of outstanding loans to total SME loans
outstanding at commercial banks), current assets of banking, GDP per capita, investment
portfolio may be the strategies to improve the stability of the financial system (Bank Z Score)
for the year and the future years ,
2. Subsequent researches can analyze the relationship between financial inclusion and
stability of the financial system based on income group levels between many countries.
Acknowledgements
I would like to thank Dr. Lukytawati Anggraeni, SP, M.Si as my Supervisor in this research.
Then Dr. Ir. Yeti Lis Purnamadewi M.Sc.Agr, and Dr. Eka Puspitawati, SP, M.Si who have
given me many advices for my research. And the last, thanks to my beloved family and best
friend for supporting me in this research.

10

References
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2
3
4
5
6
7

8
9
10
11
12
13

14

15
16

[UNCTAD]. Trade and Development Report. Geneva:

United Nations Conference on Trade and Development. 2012
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Kunt, Asli, Beck T, Honohan P. Finance for All? Policies and Pitfalls in Expanding
Access. Washington, DC: World Bank. 2008
Camara,Noelia Tuesta,David. Measuring Financial Inclusion: A Multidimensional
Index. Madrid: BBVA research; Sept 2014 : p. 30-33
[World Bank]. Data of formal account in banking sector [internet] ;
http://www.worldbank.org/
Hannig,Alfred Jansen,Stefan. Financial Inclusion and Financial Stability: Current
Policy Issues. Tokyo : Asian Development Bank Institute. 2010 ; p. 24
Dupas,Pascaline, Green,Sarah, Keats,Anthony, Robinson,Jonathan. Challenges in
Banking the Rural Poor: Evidence from Kenya's Western Province. Cambridge :
National Bureau of Economic Research. 2012 ; p. 18
Morgan,Peter J, Pontines Victor. Financial Stability and Financial Inclusion
[Working Paper 2014]. Tokyo (JP) : Asian Development Bank Institute. 2014; p. 8-13
Setiawan, Kusrini DE. Ekonometrika. Yogyakarta: Andi. 2010
[ADBI] ASEAN Development Bank Institute. Financial Inclusion in Asia Country
Surveys. Tokyo (JP) : Asian Development Bank Institute.2014; p. 45-63
Sugiyono. Statistika untuk Penelitian. Bandung. Alfabeta; 2007
Khan, H.R. Financial inclusion and financial stability: are they two sides of the same
coin? Chennai: The Indian Bankers Association and Indian Overseas Bank. 2011; p. 4
Allen,Franklin Kunt,Asli Demirguc Klapper,Leora Peria,Maria Soledad Martinez.
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Lane, G. Milesi-Ferretti. 2006. The External Wealth of Nations Mark II: Revised and
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Cooperation Council. 2006; p. 134

11

ATTACHMENT
CHOW TEST
Hypothesis:
H0: 1 = 2 = . . . = n-1 = 0 (Pooled Least Square Model)
H1: i 0 (Fixed Effect Model)
Result =
Redundant Fixed Effects Tests
Equation: Untitled
Test cross-section fixed effects

Effects Test

Statistic

d.f.

Prob.

Cross-section F

117.903226

(6,22)

0.0000

Cross-section Chi-square

122.542223

0.0000

Probability Chi-square (0.0000)<alpha (5%) -> Fixed Effect Model (FEM)

HAUSMAN TEST
Hypothesis :
H0: E(ui,t | Xi,t) = 0 (Random Effect Model)
H1: E(ui,t | Xi,t) 0 (Fixed Effect Model)
Result =
Correlated Random Effects - Hausman Test
Equation: Untitled
Test cross-section random effects

Test Summary
Cross-section random

Chi-Sq. Statistic

Chi-Sq. d.f.

Prob.

707.419358

0.0000

Probability Cross section random (0.0000)<alpha (5%) -> Fixed Effect Model (FEM)

12

ALTERNATIVE MODELS
[1]

[2]

[3]

[4]

Bank z score

Bank z score

NPL Bank

NPL Bank

(BZSi,t)

(BZSi,t)

(NPLi,t)

(NPLi,t)

BZSi,t-1

0,40641

P-value

(0.0000)***

NPLi,t-1

-0,471714

P-value

(0.0570)*

SMELi,t

10,33174

15,33785

-14,5385

-10,81406

P-value

(0.0000)***

(0.0024)***

(0.0677)*

(0.2244)

LGDPPi,t

1,234364

1,770115

-2,473145

-4,643071

P-value

(0.0245)**

(0.2049)

(0.0833)*

(0.0006)***

CGDPi,t

-0,019332

0,051767

-0,157308

-0,10435

P-value

(0.4588)

(0.0709)*

(0.0000)***

(0.0000)***

LIQi,t

0,116698

0,081872

-0,072774

0,012439

P-value

(0.0448)**

(0.0491)**

(0.1974)

(0.4507)

NFDIi,t

6,60E-07

-5,06E-08

-3,18E-06

-3,91E-06

P-value

(0.0103)**

(0.9802)

(0.1647)

(0.0015)***

OPNSi,t

-1,088197

-0,43636

2,905961

0,454017

P-value

(0.1450)

(0.5737)

(0.0020)***

(0.6200)

R-squared

0,998421

0,996596

0,934503

0,968649

R-squared adj

0,996954

0,994739

0,873685

0,951549

Prob-F

0,0000

0,0000

0,0000

0,0000

13

NORMALITY TEST
Hypothesis:
H0 : = 0 (error term has normal distribution)
H1 : 0 (error term has not normal distribution)
Result:
6

Series: Standardized Residuals

Sample 2008 2011
Observations 28

Mean
Median
Maximum
Minimum
Std. Dev.
Skewness
Kurtosis

1.37e-05
-0.037259
1.840473
-1.525205
0.772876
0.297701
2.773485

Jarque-Bera
Probability

0.473448
0.789209

0
-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

Value of Prob Jarque-Bera>alpha 5% -> Normal

MULTICOLLINIERITY TEST

Using Correlation between Independent Variables

BZST_1
CGDP
LGDP
LIQ
NFDI
OPNS
SEML

BZST_1

CGDP

LGDP

LIQ

NFDI

OPNS

SEML

1.000000
0.091933
-0.150551
-0.003131
-0.084620
-0.392875
-0.601525

0.091933
1.000000
0.577120
0.038857
-0.382516
-0.112116
0.526725

-0.150551
0.577120
1.000000
0.031744
-0.750298
0.513451
0.522399

-0.003131
0.038857
0.031744
1.000000
-0.129619
0.202783
-0.346305

-0.084620
-0.382516
-0.750298
-0.129619
1.000000
-0.442166
-0.188178

-0.392875
-0.112116
0.513451
0.202783
-0.442166
1.000000
0.291044

-0.601525
0.526725
0.522399
-0.346305
-0.188178
0.291044
1.000000

There is no correlation more than 0.8 so the model has no multicollinierity problem (Gujarati 2003).

Using VIF Indicator

Predictor
bzst-1
SMEL
Predictor
OPNS
NFDI
LIQ
CGDP
LGDPP

VIF
4.0
8.6
VIF
3.2
2.8
2.6
6.1
4.8

14

S = 1.72857
R-Sq = 98.8%
Due to VIF<10 so there is no multicol.

R-Sq(adj) = 98.4%

HETEROSKEDASTICITY TEST AND AUTOCORRELATION TEST

Weighted Statistics

R-squared

0.998421 Mean dependent var

23.98711

Adjusted R-squared

0.996954 S.D. dependent var

19.58368

S.E. of regression

1.073317 Sum squared resid

16.12812

F-statistic

680.8204 Durbin-Watson stat

2.436915

Prob(F-statistic)

0.000000

Unweighted Statistics

R-squared

0.993459 Mean dependent var

14.43605

Sum squared resid

33.60968 Durbin-Watson stat

2.097514

Calculating of Durbin h

h = (1-

h = (1-

h = -0.4925 -> Durbin h < Z /2 (1,96) so there is no autocorrelation.

Heteroskedastisitas
Value of Sum Square Residual at Weighted Statistics (16.12812) < Sum Square Residual at
unweighted Statistics (33.60968) but the model uses weighted lease squre so the model is robust.

15

CALCULATING OF ELASTICITY

Elasticity of AR (1)

= 0.40641 .

Elasticity of SMEL

= 10.33 .

Elasticity of LNGDPP =

Elasticity of NFDI

= 0.184

.
=

= 1.2343

= 0.00000067.

Elasticity of LIQ

= 0.394

= 0.0062

= 0.116698 .

= 0.1587