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Analysis of Demand and Supply of Money Supply on Economic Growth

Jelita Simanungkalit(1), Salma Diani(2), Siti Naila Rahmi(3), Fitrawaty Fitrawaty(4),


(1) Universitas Negeri Medan
(2) Universitas Negeri Medan
(3) Universitas Negeri Medan
(4) Universitas Negeri Medan
Corresponding Author

Abstract


This research examines the relationship between monetary aggregates (M1 and M2) and economic growth as measured by nominal Gross Domestic Product (GDP) in Indonesia during the period of January-June 2024. The research aims to analyze the impact of money demand and supply on economic growth using multiple linear regression analysis. Research findings reveal that the model has an explanatory capability of 71.6% in explaining nominal GDP variations. Key findings include: (1) M1 has a negative relationship with nominal GDP, with a regression coefficient of -3.240, indicating that an increase in narrow money supply is associated with a decline in GDP. This can be caused by resource diversion effects from productive sectors and lag effects in monetary policy transmission; (2) M2 shows a significant positive relationship with nominal GDP, with a regression coefficient of 9.363, indicating that an increase in broad money supply correlates with economic growth.


Keywords


monetary aggregates, M1, M2, nominal GDP, economic growth, monetary policy

References


Mankiw, N. G. (2016). Macroeconomics (9th ed.). Worth Publishers.

Keynes, J. M. (1936). The General Theory of Employment, Interest, and Money.Harcourt Brace.

Ascarya, A., & Karim, A. A. (2023). "Analisis Pengaruh Instrumen Moneter Terhadap Pertumbuhan Ekonomi Indonesia: Pendekatan Vector Error Correction Model." Jurnal Ekonomi dan Pembangunan Indonesia, 24(2), 145-168

Rahman, M. S., & Setiawan, D. (2023). "Monetary Policy Transmission and Economic Growth: Evidence from Indonesia's Dual Monetary System." Journal of Indonesian Economy and Business, 38(1), 78-96

Friedman, M., & Schwartz, A. J. (1963). A Monetary History of the United States, 1867-1960. Princeton University Press.


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DOI: 10.57235/aurelia.v4i1.4739

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