STABILITAS DAN SENSITIFITAS PERMINTAAN UANG INDONESIA

Abstract

Using an Error Correction Model in Autoregressive Distributed Lag specification combined with CUSUM and CUSUMQ tests, we examine the stability and sensitivity of Indonesia money demand theoretically derived from shopping time model. The paper demonstrates that a long-run equilibrium relationship exists between real money balances, real income, interest rate, and exchange rate. Furthermore, we find that financial liberalization and financial crisis plays a key role in determining money demand and its stability.