The analysis of causality analysis of money supply (M2) and interest rate (BI Rate) in Indonesia: an empirical study in 1990-2021

Authors

  • Roosaleh Laksono Universitas Widyatama, Indonesia
  • Ferry Mulyawan Universitas Widyatama, Indonesia
  • Paulus Sugianto Yusuf Universitas Widyatama, Indonesia

DOI:

https://doi.org/10.31943/gw.v14i3.572

Keywords:

Causality Analysis, Interest Rate (BI Rate), Indonesia, Money Supply (M2)

Abstract

This research investigates the causal relationship between the Bank Indonesia (BI) Rate and the Money Supply (M2) in Indonesia, using annual time series data from 1990 to 2022. The study reveals that an increase in the Money Supply (M2) directly impacts the BI Rate, a policy instrument employed by Bank Indonesia to manage and curb inflation. Moreover, through the rigorous application of Granger Causality Tests, the research demonstrates that the relationship between the BI Rate and Money Supply (M2) is bidirectional. This bidirectional relationship implies that changes in the interest rate influence the money supply and vice versa. These findings provide valuable insights into monetary policy dynamics and its implications for the Indonesian economy.

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Published

2023-10-26

How to Cite

Laksono, R., Mulyawan, F., & Yusuf, P. S. (2023). The analysis of causality analysis of money supply (M2) and interest rate (BI Rate) in Indonesia: an empirical study in 1990-2021. Gema Wiralodra, 14(3), 1319–1325. https://doi.org/10.31943/gw.v14i3.572

Issue

Vol. 14 No. 3 (2023): Gema Wiralodra

Section

Articles

License

Copyright (c) 2023 Roosaleh Laksono, Ferry Mulyawan, Paulus Sugianto Yusuf

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

The use of non-commercial articles will be governed by the Creative Commons Attribution license as currently approved at http://creativecommons.org/licenses/by/4.0/. This license allows users to (1) Share (copy and redistribute the material in any medium) or format; (2) Adapt (remix, transform, and build upon the material), for any purpose, even commercially.