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Determinants Of Indonesia’S Income Velocity Of Money

Author

Listed:
  • Susan Sunila Sharma

    (Deakin University)

  • Ferry Syarifuddin

    (Bank Indonesia)

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.

Suggested Citation

  • Susan Sunila Sharma & Ferry Syarifuddin, 2019. "Determinants Of Indonesia’S Income Velocity Of Money," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 21(3), pages 323-342, January.
    • Handle: RePEc:idn:journl:v:21:y:2019:i:3c:p:323-342
    DOI: https://doi.org/10.21098/bemp.v21i3.1006
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    More about this item

    Keywords

    Income Velocity of Money; Unit Root; Cointegration; Long-run and Short-run Elasticities.;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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