Joint Determinants of Monetary, Macroeconomic, Social and Income Inequality

Abdulrahman Taresh A,Dyah Wulan Sari,Rudi Purwono

doi:10.23917/jep.v21i2.11254

Abdulrahman Taresh A, Dyah Wulan Sari + Show 1 more

Open Access

https://doi.org/10.23917/jep.v21i2.11254

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Abstract

This study discusses all the potential relationships between monetary, macroeconomic, social and income inequality in an integrated manner by making Indonesia a concrete case study. This empirical study discussed the relationship based on theoretical modelling and carried out through appropriate estimators applied to the data of 33 provinces in Indonesia. To achieve this objective, the simultaneous model of seemingly unrelated regressions (SUR) was used. The results concluded that there are variables that jointly determined the monetary, macroeconomic and social also income inequality. Like, consumption can increase inflation and macroeconomic while at the same time can reduce population growth and human development, and increases income inequality. Savings which determine credit also pushes macroeconomics while simultaneously increasing population growth, and it can reduce income inequality. Minimum wages can reduce inflation and encourage production growth, while increases human development and reduces population growth also can reduce income inequality. Unemployment can also reduce inflation and increase economic growth, at the same time reduces population growth and human development while increases income inequality. Education and health encourages economic growth and the level of human development then can reduce income inequality.

Highlights

The joint achievement of economic and social development is desirable in a country
gross domestic product (GDP) and government spending are positively related to inflation, showing inflation is caused by fiscal expansion in public spending and an increase in the budget for public consumption, as Nguyen (2019) found that government spending has a positive impact on inflation in Indonesia
This study found that monetary variables namely inflation and credit jointly determined macro variables, at the same time can determine social variables, and income inequality

Summary

Introduction

The monetary and macroeconomic policies are a means of instruments to encourage social development and redistribute income. Knowing the interrelationship between monetary, macro, social, and income inequality variables are considered important when making policies on the social economy. These interrelationships are discussed separately in previous studies, especially in developing countries such as Indonesia, which has a large population, as the world’s fourth country in population size, it suffers from relative weaknesses in human development and has a high in income inequality, despite achieving high gross domestic product (GDP) so that it is Jurnal Ekonomi Pembangunan, ISSN 1411-6081, E-ISSN 2460-9331.

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