DETERMINANTS OF INDONESIA’S INCOME VELOCITY OF MONEY

  • Susan Sunila Sharma Deakin University
  • Ferry Syarifuddin
Keywords: Income velocity of money, Unit root; Cointegration; Long-run and short-run elasticities.

Abstract

Using monthly time-series data and both short-and long-run models, our paperexamines the determinants of Indonesia’s income velocity of money. Our findingssuggest that in the long-run, tax revenue, short-term interest rate, industrial productionand, in the short-run, money demand, significantly determine income velocity ofmoney. Our analysis suggests that the effect on income velocity is mostly over thelong-run as most determinants are dormant in the short-run. The implication from apolicy perspective is that shocks are unlikely to burden income velocity over short timehorizons.

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Published
2019-02-28
How to Cite
Sharma, S., & Syarifuddin, F. (2019). DETERMINANTS OF INDONESIA’S INCOME VELOCITY OF MONEY. Buletin Ekonomi Moneter Dan Perbankan, 21(3), 323-342. https://doi.org/10.21098/bemp.v21i3.1006
Section
Articles

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