Analysis Of The Influence Of Manufacturing Value Added, Exchange Rates, And Real Interest Rates On Indonesia Financial Deepening

This study aims to analyze the impact of manufacturing value added, exchange rates, and real interest rates on financial deepening in Indonesia using the Error Correction Model (ECM) method for the period 1990-2023. The short-term analysis results show that the exchange rate and real interest rate variables have a positive and significant effect on financial deepening. Interestingly, in the long-term analysis, manufacturing value added has a negative and significant on financial deepening. Similarly, both the exchange rate and real interest rate variables also have a negative and significant effect on financial deepening in Indonesia. These result indicate that the independent variables have different influence in each period. These result provide important insights for policymakers in formulating policies that better support financial sector growth in Indonesia.