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Financial Liberalization, Weighted Monetary Aggregates and Money Demand in Indonesia

This study investigates the significance of Divisia monetary aggregates in formulating the monetary policy in Indonesia. A money demand function has been constructed to compare the relative performance for Simple-sum M1 and M2 (SSM1 and SSM2) and Divisia M1 and M2 (DM1 and DM2) monetary aggregates....

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Main Authors: Puah , Chin-Hong, Hiew , Lee-Chea
Format: Working Paper
Language:English
Published: Universiti Malaysia Sarawak, (UNIMAS) 2011
Subjects:
AC Collections. Series. Collected works
HG Finance
Online Access:http://ir.unimas.my/id/eprint/3101/1/Financial%2BLiberalization%252C%2BWeighted%2BMonetary%2BAggregates%2Band%2BMoney%2BDemand%2Bin%2BIndonesia.pdf
http://ir.unimas.my/id/eprint/3101/
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spelling my.unimas.ir.31012020-08-25T08:13:41Z http://ir.unimas.my/id/eprint/3101/ Financial Liberalization, Weighted Monetary Aggregates and Money Demand in Indonesia Puah , Chin-Hong Hiew , Lee-Chea AC Collections. Series. Collected works HG Finance This study investigates the significance of Divisia monetary aggregates in formulating the monetary policy in Indonesia. A money demand function has been constructed to compare the relative performance for Simple-sum M1 and M2 (SSM1 and SSM2) and Divisia M1 and M2 (DM1 and DM2) monetary aggregates. The econometrics testing procedures that have been utilized in the estimation include unit root test, cointegration test, Vector Error Correction Model (VECM), Granger causality test and residual test. Empirical findings indicate that only DM1 model yields credible result amongst all of the money demand models. The obtained coefficients for DM1 model are consistent with a prior theoretical expectation and carry plausible magnitudes. The DM1 model is satisfactory as proven by the diagnostic tests. Divisia monetary aggregates are proven not only theoretical superior but also empirical valid as useful measurement of money for the case of Indonesia. The central bank of Indonesia may consider using Divisia monetary aggregates as the policy variables in formulating monetary policy Universiti Malaysia Sarawak, (UNIMAS) 2011 Working Paper NonPeerReviewed text en http://ir.unimas.my/id/eprint/3101/1/Financial%2BLiberalization%252C%2BWeighted%2BMonetary%2BAggregates%2Band%2BMoney%2BDemand%2Bin%2BIndonesia.pdf Puah , Chin-Hong and Hiew , Lee-Chea (2011) Financial Liberalization, Weighted Monetary Aggregates and Money Demand in Indonesia. [Working Paper]
institution Universiti Malaysia Sarawak
building Centre for Academic Information Services (CAIS)
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Malaysia Sarawak
content_source UNIMAS Institutional Repository
url_provider http://ir.unimas.my/
language English
topic AC Collections. Series. Collected works
HG Finance
spellingShingle AC Collections. Series. Collected works
HG Finance
Puah , Chin-Hong
Hiew , Lee-Chea
Financial Liberalization, Weighted Monetary Aggregates and Money Demand in Indonesia
description This study investigates the significance of Divisia monetary aggregates in formulating the monetary policy in Indonesia. A money demand function has been constructed to compare the relative performance for Simple-sum M1 and M2 (SSM1 and SSM2) and Divisia M1 and M2 (DM1 and DM2) monetary aggregates. The econometrics testing procedures that have been utilized in the estimation include unit root test, cointegration test, Vector Error Correction Model (VECM), Granger causality test and residual test. Empirical findings indicate that only DM1 model yields credible result amongst all of the money demand models. The obtained coefficients for DM1 model are consistent with a prior theoretical expectation and carry plausible magnitudes. The DM1 model is satisfactory as proven by the diagnostic tests. Divisia monetary aggregates are proven not only theoretical superior but also empirical valid as useful measurement of money for the case of Indonesia. The central bank of Indonesia may consider using Divisia monetary aggregates as the policy variables in formulating monetary policy
format Working Paper
author Puah , Chin-Hong
Hiew , Lee-Chea
author_facet Puah , Chin-Hong
Hiew , Lee-Chea
author_sort Puah , Chin-Hong
title Financial Liberalization, Weighted Monetary Aggregates and Money Demand in Indonesia
title_short Financial Liberalization, Weighted Monetary Aggregates and Money Demand in Indonesia
title_full Financial Liberalization, Weighted Monetary Aggregates and Money Demand in Indonesia
title_fullStr Financial Liberalization, Weighted Monetary Aggregates and Money Demand in Indonesia
title_full_unstemmed Financial Liberalization, Weighted Monetary Aggregates and Money Demand in Indonesia
title_sort financial liberalization, weighted monetary aggregates and money demand in indonesia
publisher Universiti Malaysia Sarawak, (UNIMAS)
publishDate 2011
url http://ir.unimas.my/id/eprint/3101/1/Financial%2BLiberalization%252C%2BWeighted%2BMonetary%2BAggregates%2Band%2BMoney%2BDemand%2Bin%2BIndonesia.pdf
http://ir.unimas.my/id/eprint/3101/
_version_ 1677784845172867072
score 13.211869

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