An Econometric Analysis of the Effect of Government Expenditure and Money Supply on the Interest Rate in Indonesia
An Econometric Analysis of the Effect of Government Expenditure and Money Supply on the Interest Rate in Indonesia
Author(s): Pasrun Adam, Muhamma RAFIY, Asrul Sani, ROSNAWINTANG ROSNAWINTANG, Zainuddin SAENONGSubject(s): Economy, Business Economy / Management, Public Finances
Published by: Reprograph
Keywords: government expenditure; money supply; interest rate; ARDL bounds tes;
Summary/Abstract: This study aims to examine the effect of government expenditure and money supply on the interest rate in Indonesia. The results of the test using an autoregressive distributed lag (ARDL) bounds test approach for quarterly data for the period 2005Q4-2017Q1 revealed the existence of a long-run effect of government expenditure and money supply on the interest rate. Every 1% rise in government expenditure led to a decrease in the interest rate by 1.48%, whereas every 1% rise in money supply led to an increase in the interest rate by 1.16%. The results also revealed a short-run effect of government expenditure and money supply on the interest rate.
Journal: Journal of Applied Economic Sciences (JAES)
- Issue Year: XIII/2018
- Issue No: 58
- Page Range: 946-952
- Page Count: 7
- Language: English