A Mathematical Approach to the Money Multiplier Analysis on Indonesian 1997–1998 Monetary Crisis

Albertus Prabu Siagian
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Albertus Prabu Siagian: Climate Policy Initiative

Economics and Finance in Indonesia, 2023, vol. 69, 47-66

Abstract: In crisis moments, massive liquidity supports, extensive cash withdrawal, and large reserve hoarding can all lead to the change in monetary base, currency ratio, and reserve ratio respectively. In turn, all these disruptions could cause money supply to change. This research aims to find out which factor (among the change in monetary base, currency ratio, and reserve ratio) became the main causal factor of increasing money supply in Indonesia during 1997–1998 crisis. The method follows mathematical equation models used by Friedman & Schwartz (1963) and Stauffer (2006) in analyzing Great Depression in the US. This research has found that the change in monetary base in Indonesia during 1997–1998 crisis became the main cause of increasing money supply in that period. This result is consistent with what the other literatures had said.

Keywords: currency ratio; monetary base; money multiplier; money supply; reserve ratio (search for similar items in EconPapers)
JEL-codes: C02 E51 G01 (search for similar items in EconPapers)
Date: 2023
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