THE SHORT- AND LONG-TERM DETERMINANTS OF MONEY AND BANK CREDIT MARKETS IN INDONESIA
INSUKINDRO (Adv. Prof. J. Richmond), Prof. J. Richmond
This thesis attempts'to analyse the determinants of the
money and bank credit markets in Indonesia for the period of 1969 (I) - 1987 (IV) by utilising recent development in econometric modelling. The approach follows relevant economic theory, using cointegration techniques and the methods of time series analysis.
The findings showed that all variables in question can be
considered to be integrated of order one. The long-run
regression coefficients estimated by an error corection model(ECM) produced similar magnitudes to those in the cointegration regression. but the standard errors of the latter could be subject to sample bias. The estimated regression coefficients of the error correction terms were statistically significant. Furthermore, the introduction of the "new" ECM in this study might lead us to suggest that the buffer stock notion underlies the demand for components of narrow money in Indonesia. A dynamic simulation was carried out to investigate the behaviour of the full model which allows us to simulate hypothetical events and policies.
Finally, by using a forward-looking model, the study
showed that the forward-looking variables could be potentially important ones in estimating our demand for money. Furthermore, the restrictions implied by the rational expectation hypothesis could not be rejected. However, with respect to the institutional features in Indonesia and the results of some non-nested tests; we are not able to definitively conclude that the forward-looking model was the "true model" of money demand in Indonesia.
Kata Kunci : Short, Long-Term, Determinants, Money, Bank, Credit Markets, Indonesia
