IDEAS home Printed from https://ideas.repec.org/a/gam/jecomi/v13y2025i4p98-d1625764.html
   My bibliography  Save this article

Money Demand in Indonesia and Its Forecasting to 2033

Author

Listed:
  • Arif Imam Suroso

    (School of Business, IPB University, Bogor 16151, Indonesia)

  • Saiful Bahri

    (PERURI, Jakarta 12160, Indonesia)

  • Noer Azam Achsani

    (School of Business, IPB University, Bogor 16151, Indonesia)

  • Suhendi

    (School of Business, IPB University, Bogor 16151, Indonesia)

  • Linda Karlina Sari

    (School of Business, IPB University, Bogor 16151, Indonesia)

Abstract

This study aims to identify the primary factors influencing the demand for money in Indonesia and to provide forecasts through 2033. The research employs two methodologies: time series econometrics and machine learning, utilizing data spanning from the first quarter of 2010 (2010Q1) to the fourth quarter of 2023 (2023Q4). The results of the study indicate that, in the long term, the demand for money in Indonesia is influenced by two main determinants: Gross Domestic Product (GDP) and Financial Institution Depth (FID). In the short term, the significant determinants include interest rates, inflation rates, GDP lag, FID lag, and electricity access. The forecast results suggest that the demand for money in Indonesia is projected to experience positive growth, reaching IDR 16,855,845 billion by 2033. This finding underscores the continued importance of physical currency in the Indonesian economy. Based on these results, this study serves as a guideline for policymakers in managing the demand for money by considering the variables that can either increase or decrease this demand. The positive forecast for the demand for money also highlights its significant role in supporting a stable Indonesian economy in the future.

Suggested Citation

  • Arif Imam Suroso & Saiful Bahri & Noer Azam Achsani & Suhendi & Linda Karlina Sari, 2025. "Money Demand in Indonesia and Its Forecasting to 2033," Economies, MDPI, vol. 13(4), pages 1-15, April.
    • Handle: RePEc:gam:jecomi:v:13:y:2025:i:4:p:98-:d:1625764
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-7099/13/4/98/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2227-7099/13/4/98/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Arrau, Patricio & De Gregorio, Jose & Reinhart, Carmen M. & Wickham, Peter, 1995. "The demand for money in developing countries: Assessing the role of financial innovation," Journal of Development Economics, Elsevier, vol. 46(2), pages 317-340, April.
    2. Benati, Luca & Lucas, Robert E. & Nicolini, Juan Pablo & Weber, Warren, 2021. "International evidence on long-run money demand," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 43-63.
    3. Arango-Arango, Carlos A. & Suárez-Ariza, Nicolás, 2020. "Digital payments adoption and the demand for cash: New international evidence," Journal of Payments Strategy & Systems, Henry Stewart Publications, vol. 14(4), pages 392-410, December.
    4. Mohsen Bahmani-Oskooee & Sahar Bahmani, 2015. "Nonlinear ARDL Approach and the Demand for Money in Iran," Economics Bulletin, AccessEcon, vol. 35(1), pages 381-391.
    5. Lucas, Robert E. & Nicolini, Juan Pablo, 2015. "On the stability of money demand," Journal of Monetary Economics, Elsevier, vol. 73(C), pages 48-65.
    6. Noemi Levy-Orlik, 2023. "The role of money and financial institutions in Kalecki and Keynes," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 46(4), pages 527-544, October.
    7. James, Gregory A., 2005. "Money demand and financial liberalization in Indonesia," Journal of Asian Economics, Elsevier, vol. 16(5), pages 817-829, October.
    8. Roussel, Yannick & Ali, Amjad & Audi, Marc, 2021. "Measuring the Money Demand in Pakistan: A Time Series Analysis," MPRA Paper 106629, University Library of Munich, Germany.
    9. Yannick Roussel & Amjad Ali & Marc Audi, 2021. "Measuring The Money Demand In Pakistan: A Time Series Analysis," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 10(1), pages 27-41, March.
    10. Georges V. Houngbonon & Erwan Le Quentrec & Stefania Rubrichi, 2021. "Access to electricity and digital inclusion: evidence from mobile call detail records," Palgrave Communications, Palgrave Macmillan, vol. 8(1), pages 1-11, December.
    11. Oluwarotimi Ayokunnu Owolabi & Asa-Ruth Oboku Oku & Abidemi Alejo & Toun Ogunbiyi & Jeremiah Ifeanyi Ubah, 2021. "Access to Electricity, Information and Communications Technology (ICT), and Financial Development: Evidence From West Africa," International Journal of Energy Economics and Policy, Econjournals, vol. 11(2), pages 247-259.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Barnett, William A. & Ghosh, Taniya & Adil, Masudul Hasan, 2022. "Is money demand really unstable? Evidence from Divisia monetary aggregates," Economic Analysis and Policy, Elsevier, vol. 74(C), pages 606-622.
    2. Masudul Hasan Adil & Rafiq Hussain & Adelajda Matuka, 2022. "Interest rate sensitivity of demand for money and effectiveness of monetary policy: fresh evidence from combined cointegration test and ARDL approach," SN Business & Economics, Springer, vol. 2(7), pages 1-24, July.
    3. Masudul Hasan Adil & Neeraj Hatekar & Pravakar Sahoo, 2020. "The Impact of Financial Innovation on the Money Demand Function: An Empirical Verification in India," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 14(1), pages 28-61, February.
    4. Masudul Hasan Adil & Aditi Chaubal, 2024. "Money demand stability in India: allowing for an unknown number of breaks," Empirical Economics, Springer, vol. 67(3), pages 941-983, September.
    5. Nandini Sud, 2024. "Is money velocity pro-cyclical? The case of India," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 13(1), pages 1-25, December.
    6. repec:rfh:jprjor:v:8:y:2022:i:2:p:1-15 is not listed on IDEAS
    7. Semyon Malamud & Andreas Schrimpf, 2016. "Intermediation Markups and Monetary Policy Passthrough," Swiss Finance Institute Research Paper Series 16-75, Swiss Finance Institute.
    8. ALBULESCU, Claudiu Tiberiu & Pepin, Dominique, 2018. "Monetary Integration, Money-Demand Stability, and the Role of Monetary Overhang in Forecasting Inflation in CEE Countries," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 33(4), pages 841-879.
    9. Fatima Hanif & Nosheen Sarwat & Muhammad Rafique, 2022. "Past Abusive Supervision, Hindrance Appraisal And Posttraumatic Stress: The Moderating Role Of Social Support," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 11(2), pages 212-219, June.
    10. Muhammad Akmal & Khawaja Khalid Mehmood, 2022. "The Influence Of Person Job Fit On Innovative Work Behavior Through Intrinsic Motivation And Creative Self-Efficacy," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 11(2), pages 331-341.
    11. Benati, Luca & Lucas, Robert E. & Nicolini, Juan Pablo & Weber, Warren, 2021. "International evidence on long-run money demand," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 43-63.
    12. Marc Audi & Amjad Ali, 2023. "Public Policy and Economic Misery Nexus: A Comparative Analysis of Developed and Developing World," International Journal of Economics and Financial Issues, Econjournals, vol. 13(3), pages 56-73, May.
    13. Muhammad Bilal Ahmad & Ghulam Mustafa & Dr. Muhammad Asif Shahzad, 2021. "A Comparative Study Of Public And Private Students’ Attitude Towards Learning English At Secondary School Level," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 10(4), pages 101-106, December.
    14. Abdul Rehman Tahir, 2021. "Mpact Of Green Marketing On Consumer Purchase Intention," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 10(2), pages 76-84, June.
    15. Nazik Maqsood & Tanveer Ahmad Shahid & Abaid Ul Rehman, 2024. "The Impact of Dividend and Tax Avoidance on Earning Management of Companies," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 13(1), pages 256-272.
    16. Muhammad Nasir Hussain & Muhammad Ramzan Sheikh & Babar Hussain & Asad Abbas, 2022. "An Estimation Of Monetary Policy Reaction Function In Pakistan," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 11(2), pages 342-349.
    17. Adil, Masudul Hasan & Haider, Salman & Hatekar, Neeraj, 2018. "The empirical verification of money demand in case of India: Post-reform era," MPRA Paper 87148, University Library of Munich, Germany, revised 07 Jun 2018.
    18. Belongia, Michael T. & Ireland, Peter N., 2019. "The demand for Divisia Money: Theory and evidence," Journal of Macroeconomics, Elsevier, vol. 61(C), pages 1-1.
    19. Zerish Tasleem & Muhammad Hatim & Mahnoor Malik & Muhammad Nadeem & Muhammad Tariq Ramzan, 2022. "The Impact Of Health Facilities On Rural Poverty In Southern Punjab, Pakistan," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 11(2), pages 104-109, June.
    20. Arzoo Mushtaq & Shahnawaz Malik & Muhammad Hanif Akhtar, 2022. "Nonlinear Taylor Rule And Inflation-Targeting In Pakistan: A Time Series Analysis," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 11(2), pages 185-197, June.
    21. Han Gao & Mariano Kulish & Juan Pablo Nicolini, 2020. "Two Illustrations of the Quantity Theory of Money Reloaded," Working Papers 774, Federal Reserve Bank of Minneapolis.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jecomi:v:13:y:2025:i:4:p:98-:d:1625764. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.