The Role of Advertising Expenditure in Measuring Indonesia’s Money Demand Function

Lee-Chea Hiew, Chin-Hong Puah and Muzafar Shah Habibullah

MPRA Paper from University Library of Munich, Germany

Abstract: Using the consumer theory approach as suggested by Habibullah (2009), this study aims to shed new light on monetary authority by incorporating advertising expenditure, a variable that has been neglected in the past, into study of the money demand function in Indonesia. In addition, different measurements of monetary aggregates (simple-sum and Divisia money) have been used in the estimation to provide better insight into the selection of a suitable monetary policy variable for the case of Indonesia. Empirical findings from the error-correction model (ECM) indicate that the advertising expenditure variable has a significant impact on the demand for money. Furthermore, as compared to simple-sum money, the model that used Divisia monetary aggregates rendered more plausible estimation results in the estimation of money demand function.

Keywords: Advertising Expenditure; Divisia Money; Money Demand (search for similar items in EconPapers)
JEL-codes: C43 E41 M37 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-mac, nep-mkt, nep-mon and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:50223

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