ANALYSIS OF FACTORS AFFECTING REQUEST FOR MONEY IN INDONESIA

Abstract

By              : Elisa Tria Hadi

Advisor  I   : Dr. Alvis Rozani, S.E, M.Si

Advisor II  : Helmawati, S.E, M.Si

SUMMARY

Money has an important role in the economy not only as a means of exchange between goods or services but also a means to achieve economic stability. The stability of money and price demand is an important element in maintaining economic stability that is part of national stability.

  The analysis of money demand is an analysis of the economic quantities that will be used by the government as an indicator of consideration to create a monetary policy. The money supply becomes extremely important because of its role as an instrument of economic movements. The size of the money supply will affect the real purchasing power of the community and also the availability of commodities needed by the community.

  This study contains a study on how big the influence of Gross Domestic Product (GDP), Inflation, Domestic Interest Rate and Foreign Interest Rate (SIBOR) to Money Demand (M1) in Indonesia. Data used in this research is Time Series data from 1990 until 2016. Analyzer used in this research is Error Correction Model (ECM).

The results showed that in the short run only Inflation and SIBOR variables that have a positive effect on Money Demand. Meanwhile, the variables of Gross Domestic Product (GDP), Domestic Interest Rate and Economic Crisis negatively affect the Money Demand. In the long run only the variable of Gross Domestic Product (GDP) and Economic Crisis which have positive and significant impact on Money Demand. Meanwhile, the Inflation, Domestic Interest and SIBOR variables have a negative and insignificant effect on Money Demand in Indonesia.

Keyword: Money Demand,  Gross Domestic Product, Inflation, Domestic Interest Rate and Foreign Interest Rate (SIBOR), Economic Crisis, Error Correction Model(ECM).