ANALYSING THE DEMAND FOR FINANCIAL ASSETS IN INDONESIA

Abstract

This paper analyses the demand for three important financial assets (i.e. demand deposits) in Indonesia: demand deposits, saving deposits and time deposits. We use a system-wide approach to consumption economics to perform the analysis in the long and short run. The estimation results reveal that a) generally, the wealth elasticity for saving deposits is above one, for time deposits is below one, and for demand deposits it varies from 0.5 (in the short-run) to 1.1 (in the long-run); b) the own interest rate coefficients are statistically significant and positive, as expected; and  c) in the long run, while the assets of demand deposits and time deposits and saving deposits and time deposits are pairwise subsitutes, the assets of demand deposits and saving deposits are pairwise complements.