LONG-RUN MONEY AND INFLATION NEUTRALITY TEST IN INDONESIA

Authors

Arintoko Arintoko

Document Type

Article

Abstract

This paper investigates long-run neutrality of money and inflation in Indonesia, with due consideration to the order of integration, exogeneity, and cointegration of the money stock-real output and the money stock-price, using annual time-series data. The Fisher-Seater methodology is used to do the task in this research. The empirical results indicate that evidence rejected the long-run neutrality of money (both defined as M1 and M2) with respect to real GDP, showing that it is inconsistent with the classical and neoclassical economics. However, the positive link between the money and price in long run holds for money defined as M1 rather than M2, which consistent with these theories. In particular, besides the positive effect to long-run inflation, monetary expansions have long-run positive effect on real output in the Indonesian economy.

Recommended Citation

Arintoko, Arintoko (2011) "LONG-RUN MONEY AND INFLATION NEUTRALITY TEST IN INDONESIA," Bulletin of Monetary Economics and Banking: Vol. 14: No. 1, Article 6.
DOI: https://doi.org/10.21098/bemp.v14i1.79
Available at: https://bulletin.bmeb-bi.org/bmeb/vol14/iss1/6

First Page

75

Last Page

99

Creative Commons License

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

Country

Indonesia

Affiliation

Jenderal Soedirman University