THE STABILTY OF MONEY DEMAND IN INDONESIA: AN ARDL APPROACH

Mahrus Lutfi Adi Kurniawan

Abstract


This study examines the demand for money for both M2 and M1 in Indonesia using the autoregressive distributed lag (ARDL) approach. Based on the results of the bound test, the demand for money in Indonesia is co-integrated, and there is a long-term relationship with factors its determinant namely, income, inflation, domestic interest rates, foreign interest rates and exchange rates. Income, inflation and exchange rate variables have a positive effect on M2 and M1 in the short and long term, while the interest rate variable only affects M2. The stability test using the CUSUM and CUSUMQ approaches found that the demand for money in Indonesia is unstable. The instability in demand for money implies that the money targeting policy in Indonesia cannot be implemented

Keywords


Demand for money; ARDL; bound test

Full Text:

PDF

References


Akinlo, E. A. 2006. The stability of money demand in Nigeria: An autoregressive distributed lag approach. Journal of Policy Modelling, 28(4), 445-452.

Alamsyah, H., Joseph, C., Agung, J., dan Zulverdy, D. 2001. Towards implementation of inflation targeting in Indonesia. Bulletin of Indonesian Economic Studies, 37, 309-324.

Asongu, S.A. 2016. New empirics of monetary policy dynamics: Evidence from the CFA franc zones. African Journal of Economics and Management Studies, 7(2), 164-204.

Baharumshah, A, Z., Mohd, S, H., dan Masih, A, M, M. 2009. The stability of money demand in China: evidence from the ARDL model. Economic System, 33, 231-244.

Bahmani-Oskooee, M., Wang, Y. 2007. How stable is the money demand function in China?. Journal Economic Development. 23(1). 21-33.

Brown, R. L., Durbin, J., Evans, J. M. 1975. Techniques for testing the constancy of regression relationships over time (with Discussion). J. Roy. Statist. Soc. B. 37, 149-192.

Folarin, O. E., Asongu, S. A. 2019. Financial liberalization and long-run stability of money demand in Nigeria. Journal of Policy Modeling, 41, 963-980.

James, G. A. 2005. Money demand and financial liberalization in Indonesia. Journal of Asian Economics, 16(5), 817-829.

Narayan, P. K., 2007. Is money targeting an option for Bank Indonesia?. Journal of Asian Economics, 18, 726-738.

Pesaran, M. H., dan Shin, Y. 1999. An autoregressive distributed lag modelling approach to cointegration analysis, Chapter 11. In S. Storm (Ed.), Econometrics and economic theory in the 20th century: The Ragnar Frisch Centennial symposium, Cambridge: Cambridge University Press.

Pesaran, H. M., Shin, Y., dan Smith, R. J. 2001. Bound testing approaches to the analysis of level relationship. Journal of Applied Economics, 84(2), 192-216.

Prawoto, N. 2010. Permintaan uang di Indonesia: konsep Keynesian dengan pendekatan PAM. Jurnal Ekonomi & Studi Pembangunan, Vol. 1, No. 1, 1-13.

Rogoff, K. 2017. Monetary policy in a low interest rate world. Journal of Policy Modeling, 39(4), 673-679.

Singh, R., dan Kumar, S. 2012. Application of the alternative techniques to estimate demand for money in developing countries. Journal of Developing Areas, 46(2), 43-63.

Widodo, A. 2015. Faktor-faktor makroekonomi yang mempengaruhi permintaan uang di Indonesia. Jurnal Ekonomi & Studi Pembangunan. Vol. 16, No. 1, 63-72.




DOI: http://dx.doi.org/10.12928/optimum.v10i2.18002

Refbacks

  • There are currently no refbacks.


Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Optimum: Jurnal Ekonomi dan Pembangunan
Fakultas Ekonomi dan Bisnis Universitas Ahmad Dahlan
Kampus 1 Jalan Kapas 9 Yogyakarta 55166 INDONESIA
Phone: +62-274-563515
E-mail:optimum@uad.ac.id

p-ISSN:1411-6022 | e-ISSN: 2613-9464

This work is licensed under a Creative Commons Attribution 4.0 International License