Relation Between Bi Rate and Banks Interest Rate

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Part I – Relation between BI rate and banks interest rate

A. BI rate
We take the BI rate, as the variable being estimated, from the period of 2006 until 2012. We then take the average rate in each year, rather than taking the rate in each month. As a note to the year 2012, we take the average rate that ranges only from January until August.

Figure 1. BI rate (Percent per Annum)
Source :
Indonesian Financial Statistics, Bank of Indonesia, http://www.bi.go.id/web/en/Statistik/Statistik+Ekonomi+dan+Keuangan+Indonesia/Versi+HTML/Sektor+Moneter/

Year | BI rate (%)|
2006| 9.750|
2007| 8.000|
2008| 9.250|
2009| 6.500|
2010| 6.500|
2011| 6.583|
2012*| 5.781|
| |
*January-August| |

Figure 2. yearly average of BI rate

B. Lending Rate
We take the banks lending rate, as the first estimating variable, from the period of 2006 until 2012. We then take the yearly average on each year, by combining all the lending rate given by each type of loan in each year. As a note to the year 2012, we take the average rate ranging only from January until August.

Figure 3. Interest rates of rupiah loans by group of banks (percent per annum), continued Source :
Indonesian Financial Statistics, Bank of Indonesia, http://www.bi.go.id/web/en/Statistik/Statistik+Ekonomi+dan+Keuangan+Indonesia/Versi+HTML/Sektor+Moneter/

Figure 4. Interest rates of rupiah loans by group of banks (percent per annum) Source :
Indonesian Financial Statistics, Bank of Indonesia, http://www.bi.go.id/web/en/Statistik/Statistik+Ekonomi+dan+Keuangan+Indonesia/Versi+HTML/Sektor+Moneter/

Year| Lending rate|
2006| 16.519|
2007| 14.941|
2008| 16.126|
2009| 15.656|
2010| 14.517|
2011| 13.723|
2012*| 13.172|
| |
Figure 5. yearly average of banks interest rate (*Jan-Aug)| C. Deposit Rate
We take the banks deposit rate, as the second estimating variable, from the period of 2006 until 2012. We then take the yearly average on each year, by combining all the deposit rate given by each type of bank in each year. As a note to the year 2012, we take the average rate ranging only from January until August.

Figure 6. Interest rates of saving deposits in rupiah by group of banks (percent per annum) Source :
Indonesian Financial Statistics, Bank of Indonesia, http://www.bi.go.id/web/en/Statistik/Statistik+Ekonomi+dan+Keuangan+Indonesia/Versi+HTML/Sektor+Moneter/

Year | Deposit rate|
2006| 4.456|
2007| 3.588|
2008| 3.916|
2009| 3.446|
2010| 3.313|
2011| 2.505|
2012*| 2.023|
| |
|
Figure 7. yearly average of deposit rate(*Jan-Aug)
D. Regression Analysis
Shown below in Figure 8, is the summary of Figure 2, 5, and 7. BI rate is the variable being estimated, that is, Y. Lending rate as the first estimating variable, X1. And Deposit rate as the second estimating variable, X2. Year | BI rate (%) - Y| Lending rate - X1| Deposit rate - X2| 2006| 9.750| 16.519| 4.456|

2007| 8.000| 14.941| 3.588|
2008| 9.250| 16.126| 3.916|
2009| 6.500| 15.656| 3.446|
2010| 6.500| 14.517| 3.313|
2011| 6.583| 13.723| 2.505|
2012*| 5.781| 13.172| 2.023|
Figure 8. The summary(*Jan-Aug)
And the following is the complete summary output of regression analysis with seven obervations (2006-2012*), based on the data depicted on Figure 8. Regression Statistics|  | | | | |
Multiple R| 0.8669| | | | |
R Square| 0.7515| | | | |
Adj. R Square| 0.6272| | | | |
Standard Error| 0.9382| | | | |
Observations| 7| | | | |
| | | | | |
ANOVA| | | | | |
 | df| SS| MS| F| Significance F|
Regression| 2| 10.6459| 5.3229| 6.0473| 0.0618|
Residual| 4| 3.5209| 0.8802| | |
Total| 6| 14.1668|  |  |  |
| | | | | |
 | Coefficients| Standard Error| t Stat| P-value| Partial F| Intercept| 2.1859| 11.3019| 0.1934| 0.8561| 0.0374|
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