Financial Liberalization and Divisia Money Demand In Indonesia

Advanced Science Letters, Vol 23, 3155-3158, 2017

Selasa, 11 Februari 2020 15:14 | Sudah dibaca 127 kali

Money demand function that turns out to be unstable due to the financial liberalization has affected the effectiveness of monetary policy that utilizes monetary targeting as policy target. Thus, Divisia monetary aggregate that is consistent with the economic theory has been used to examine the money demand function in Indonesia. Monetization is also included as a determinant of money demand to measure the financial deepening. A stable M2 money demand has been identified via the use of Divisia M2 money and the inclusion of monetization variable. Monetary targeting can serve as alternative policy target for Indonesia and there is a possibility for a return to monetary targeting in Indonesia.

Kata Kunci: divisi, financial liberalization, monetization, money demand