Analysis of Relationship between Third Party Funds and Interest Rate With Distribution of Investment Credits and Working Capital Credit by Commercial Banks in Indonesia

Abstract

The research aims to analyze the relationship between interest rates and third party funds in banks in the form of demand deposits, savings, and deposits with investment credit and working capital loans. The method used to carry out this analysis is vector autoregressive which is divided into two models for each investment credit and working capital credit. In each regression model, an analysis of impulse response was carried out to see the variable credit response and variance decomposition to see the contribution of each variable to variations in other variables.In model 1  the investment credit variable responds to the positive shock variable deposits and demand deposits, on the contrary responds negatively to the shock of savings and interest rates. In model 2 the working capital credit variable responds positively to the variables of demand deposits, deposits, savings and interest rates. These results provide evidence that the collection of third party funds is a variable that affects the realization of lending by banks.