Analysis of Demand and Supply of Money Supply on Economic Growth

Authors

  • Jelita Simanungkalit Universitas Negeri Medan, Indonesia
  • Salma Diani Universitas Negeri Medan, Indonesia
  • Siti Naila Rahmi Universitas Negeri Medan, Indonesia
  • Fitrawaty Fitrawaty Universitas Negeri Medan, Indonesia

DOI:

https://doi.org/10.57235/aurelia.v4i1.4739

Keywords:

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

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.

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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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Published

2024-12-30

Issue

Vol. 4 No. 1 (2025): January 2025

Section

Articles

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