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2021•Psychology and Education JournalOpen access

An Empirical Study on Monetary Policy and Economic Growth: The case of Indonesia using an ARDL – ECM Approach

Samoon Safiullah

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Abstract

This study explores the role of monetary policy instruments, particularly through the board money supply and inflation, in support of economic growth in Indonesia. The research base on the long-run co-integration approach using the data from 1970 to 2019. The goal of this study complies with applying the Autoregressive Distributed Lag (ARDL), and Error Correction Model (ECM), for finding out the long-run co-integration approach among dependents and independent variables. The research includes the Augmented Dickey-Fuller (ADF) unit root test for stationary analysis. The ECM results show that inflation plays a significant but negative role in economic growth in Indonesia. On the other hand, the money supply has also inversely related to the country's economic growth but not significant

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This study explores the role of monetary policy instruments, particularly through the board money supply and inflation, in support of economic growth in Indonesia. The research base on the long-run co-integration approach using the data from 1970 to 2019. The goal of this study complies with applying the Autoregressive Distributed Lag (ARDL), and Error Correction Model (ECM), for finding out the long-run co-integration approach among dependents and independent variables. The research includes the Augmented Dickey-Fuller (ADF) unit root test for stationary analysis. The ECM results show that inflation plays a significant but negative role in economic growth in Indonesia. On the other hand, the money supply has also inversely related to the country's economic growth but not significant

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Available abstract

This study explores the role of monetary policy instruments, particularly through the board money supply and inflation, in support of economic growth in Indonesia. The research base on the long-run co-integration approach using the data from 1970 to 2019. The goal of this study complies with applying the Autoregressive Distributed Lag (ARDL), and Error Correction Model (ECM), for finding out the long-run co-integration approach among dependents and independent variables. The research includes the Augmented Dickey-Fuller (ADF) unit root test for stationary analysis. The ECM results show that inflation plays a significant but negative role in economic growth in Indonesia. On the other hand, the money supply has also inversely related to the country's economic growth but not significant

Key concepts: Distributed lag, Money supply, Inflation (cosmology), Economics, Unit root test, Autoregressive model, Unit root, Augmented Dickey–Fuller test

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