Abstract
This study explores the role of monetary policy instruments, particularly through the board money supply and inflation, in support of economic growth in Indonesia. The research base on the long-run co-integration approach using the data from 1970 to 2019. The goal of this study complies with applying the Autoregressive Distributed Lag (ARDL), and Error Correction Model (ECM), for finding out the long-run co-integration approach among dependents and independent variables. The research includes the Augmented Dickey-Fuller (ADF) unit root test for stationary analysis. The ECM results show that inflation plays a significant but negative role in economic growth in Indonesia. On the other hand, the money supply has also inversely related to the country's economic growth but not significant
Highlights
Does it really happen on Indonesian macro economy? This paper investigates the relations www.psychologyandeducation.net between monetary policy by its instruments and stock market movement
Augmented Dickey-Fuller (ADF) test shows that all variables, including Gross Domestic Product (GDP), board money supply (BMS), and inflation rates (INFR), are stationary at I (0), where inflation rate and supply of money are stationary at levels
The findings reveal that the inflation rate is negatively correlated with GDP, which indicates that the inflation rate is the dominant monetary policy tool that will decrease economic growth by approximately 0,104880 if the inflation rate increases in one unit
Summary
Stock market has become one of the main subjects in terms of macroeconomic stability. The monetary policy approach at the operational level is expected to influence the level of the financial markets and, the deposit and lending levels in the whole banking framework and in other financial institutes as well in the assessment of the interest rate Adjustments in those levels can affect production and inflation The Indonesian Bank works effectively to maintain macroeconomic stability, focusing on rupiah stability Indonesia is among those countries which have a floating free exchange mechanism. As many economic studies have shown, monetary policy instruments can influence growth in a country Considering these realities and the key role played by money supply in achieving economic growth in a country, this paper is to examine the impacts of inflation rate, board money supply on economic growth in Indonesia through an econometric perspective. For the accomplishment of this research goal, the (ARDL) econometric modern model, based on the Bound Test Approach model for long-term using 49 years data from 1970 to 2019
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