DETERMINANTS OF INDONESIA’S INCOME VELOCITY OF MONEY

Susan Sunila Sharma () and Ferry Syarifuddin ()
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Susan Sunila Sharma: Deakin University
Ferry Syarifuddin: Bank Indonesia

Bulletin of Monetary Economics and Banking, 2019, vol. 21, issue 3, 323-342

Abstract: Using monthly time-series data and both short- and long-run models, our paper examines the determinants of Indonesia’s income velocity of money. Our findings strongly suggest that in the long-run, tax revenue, short-term interest rates, and industrial production, and in the short-run, money demand significantly determines income velocity of money. Our analysis suggests that the effect on income velocity is mostly over the long-run as most determinants are dormant in the short-run. The implication from a policy perspective is that shocks that are transitory are unlikely to burden income velocity.

Keywords: Income Velocity of Money; Unit Root; Cointegration; Long-run and Short-run Elasticities. (search for similar items in EconPapers)
JEL-codes: E4 E5 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:21:y:2019:i:3c:p:323-342

DOI: 10.21098/bemp.v21i3.1006

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