The testing of money neutrality in economic growth of Indonesia

Muammil Sun’an, Amran Husen

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.


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DOI: https://doi.org/10.18860/mec-j.v1i1.4575

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