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The testing of money neutrality in economic growth of Indonesia Sun’an, Muammil; Husen, Amran
MEC-J (Management and Economics Journal) Vol 1, No 1 (2017)
Publisher : Faculty of Economics, State Islamic University of Maulana Malik Ibrahim Malang

Show Abstract | Download Original | Original Source | Check in Google Scholar | Full PDF (744.623 KB) | DOI: 10.18860/mec-j.v1i1.4575

Abstract

This study aim is to test the money neutrality in a narrow sense (M1) and a broad sense (M2) to the growth of output (GDP) in Indonesia, both in short term and long term. This research uses quarterly time series data at 2010 - 2016 periods. The analysis tool used is Error Correction Model (ECM). The results show that short-term money supply (M1 and M2) affect on output growth. However, in the long term, only money circulation in a broad sense (M2) affects on output growth, which also means that money is not neutral because it affects the real sector (GDP). Keywords: M1, M2, Population, Capital, and Economic Growth.