Assessing the Role of Banking Technology in Promoting Economic Growth: Evidence from Indonesia

Abstract

This study investigates the impact of banking technology, proxied by Bank Indonesia Real Time Gross Settlement (BI-RTGS) and electronic money transactions, on economic growth in Indonesia from 2010 to 2022. Using the Vector Error Correction Model (VECM), the authors analyze the relationship between banking indicators and economic growth. The results suggest that banking technology variables have a significant influence on economic growth, with electronic money showing a positive response and BI-RTGS exhibiting a negative response in the short run. However, the study has limitations, such as not accounting for the Covid-19 pandemic using dummy variables. The findings highlight the potential of electronic money as a tool to stimulate economic growth in Indonesia. Future research should explore the long-term effects of banking technology on economic growth and consider the impact of exogenous shocks like the pandemic.