Abstract
This research explain about the impact of electronic money and currency on money multiplier M1 and velocity of money M1 with VECM analyzing method. data used in this reserach are secondary data, it used from 2009 quarter I until 2018 quarter IV. There are 4 measurements that are used to measure money multiplier, electronic money, currency ratio, excess reserve ratio, reserve requirement ratio. To measure velocity of money there are 5 measurements that are used, electronic money, currency, inflation, product domestic product, and interest rate SBI. The result found that in the long term electronic money and currency affected money multiplier M1. On the velocity of money model electronic money and currency affected velocity of money M1 on the long term. The result of impulse response function (IRF) on money multiplier M1 show that electronic money has a positive correlation, while the currency ratio has a negative correlation, on the velocity of money model both electronic money and velocity of money showed a negative correlation. In variance decomposition found that electronic money has a huge contribution to affect money multiplier model and velocity of money model M1. Thus the results of the study can be concluded that electronic money affected both money multiplier M1 and velocity of money M1. The monetary authorities should take electronic money into consideration as crucial variable in the money supply to maintain the stability of money supply.
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More From: Journal of Economic Development and Social Research
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