Monetary and fiscal policy mix connectivity towards the business cycle in Indonesia

Authors

  • Regina Niken Wilantari Economics Department, Faculty of Economics and Business, Universitas Jember, Indonesia
  • Imro'atul Husna Afriani English Education Study Program, Universitas 17 August 1945, Indonesia

DOI:

https://doi.org/10.22437/ppd.v9i2.11489

Keywords:

Business Cycle, Monetary, Money Supply, Vector Error Correction Model

Abstract

This research is based on the magnitude of the influence of monetary and fiscal aspects, namely the money supply, exchange rates, government spending, and taxes on the business cycle in Indonesia. This study aims to examine the effect of the connection between the monetary and fiscal policy mix on the business cycle in Indonesia. For analysis purposes, secondary data was used in the form of time-series data from 1970–2017. The method used is the Vector Error Correction Model (VECM) to see long-term and short-term relationships. In the estimation results, it is found that in the long-term period, the monetary variables (money supply and exchange rates) and fiscal variables (government expenditures and taxes) have a significant positive effect on the business cycle in Indonesia.In contrast, the monetary variables that have a significant effect in the short-term period are only the amount variable money supply. There are no fiscal variables that have a significant effect on the business cycle in Indonesia. The interaction of monetary and fiscal policies is still effectively implemented in Indonesia.

Downloads

Download data is not yet available.

References

Aßhoff, S., Belke, A., Osowski, T. (2021). Unconventional monetary policy and inflation expectations in the Euro area. Economic Modelling, 102 (1), 55-64

Bawono, S., Zainuri., R & Niken. (2019). Dynamics Of Real Exchange Rate And Three Financial Crisis: Purchasing Power Parity Relative Approach In Indonesia And Thailand. International Journal of Scientific & Technology Research, 8(5), 58-62

Bogoviz, A. (2020). Complex Systems: Innovation and Sustainability in the Digital Age. Switzerland: Springer

Boakye, E., Zhao, H., Ahia, B. & Damoah, M. (2020). Mitigating the Socio-Economic Impacts of COVID-19; Role of Governments in Sub-Saharan Africa, Fiscal and Monetary Policy Perspectives. Open Journal of Social Sciences, 8, 300-318

Caprio, G., Bacchetta, P. (2012). Handbook of Safeguarding Global Financial Stability. London: Elsevier

Chen, X., Wohlfarth, P., & Smith, R.P. (2021). China's money demand in a cointegrating vector error correction model. Journal of Asian Economics, 75(1), 13-38.

Clarke, T., O'Brien, J., & O'Kelley, C. (2019). The Oxford Handbook of the Corporation. Oxford, UK: Oxford University Press

Damayanti, L., & Rusminingsih, D. (2021). Human Identity Factors in Human Capital Investment in Driving Financial Performance, Case Study of the Islamic Hospitality Industry in Indonesia. Tamansiswa Management Journal International. 1(1), 3-5.

Davar, E. (2016). The 21st Century Scandal Must Be Prevented: Keynes vs Hazlitt. Modern Economy, 7, 353-370.

Dunning, J.H. (2014). Economic Analysis and Multinational Enterprise. London,UK: Routledge

Drean, B. (2021). Education, Microfinance, and Poverty in Philippines. Tamansiswa Accounting Journal International. 1(1), 33-38.

Garang, A., Yacouba, K. & Thiery, K. (2018). Time Series Bounds Approach to Foreign Direct Investment, Unemployment and Economic Growth in Uganda. Modern Economy, 9, 87-96.

Gerdesmeier, D. (2011). Price Stability: Why is it Important for You?. Frankfurt, Germany: European Central Bank

Gitman, L.J., Joehnk, M.D., Smart,S., & Juchau, R.H. (2015). Fundamentals of Investing. Frenchs Forest, Australia: Pearson

Grauwe, P.D. & Ji,Y. (2019). Behavioural Macroeconomics: Theory and Policy. Oxford, UK : Oxford University Press

Handa, J. (2008). Monetary Economics. London: Routledge

Harnphattananusorn, S. & Puttitanun, T. (2021). Generation gap and its impact on economic growth. Heliyon, 7(6), 7-16.

Hartley, J., Hoover,K. & Salyer, K.D. (2013). Real Business Cycles: A Reader. London,UK: Routledge

Herzog, B. (2014). Applied Mathematical Theory for Monetary-Fiscal Interaction in a Supranational Monetary Union. Journal of Applied Mathematics and Physics, 2, 737-744

Hidayanti, F.A. & Prabowo, B.H. (2021). Monetary Analysis of Indonesia's Economic Growth After the Asian Financial Crisis. Tamansiswa Accounting Journal International. 1(1),3-5.

Hutton, W. (2012). The Revolution That Never Was. London: Penguin

Jacobs, J. (2012). Econometric Business Cycle Research. Cham, Switzerland: Springer

Mao,X., Yang, A.C., Peng, C.K., & Shang,P. (2020). Analysis of economic growth fluctuations based on EEMD and causal decomposition. Physica A: Statistical Mechanics and its Applications, 553(1), 46-61.

Marglin, S.A. (2018). Raising Keynes: A General Theory for the 21st century. EconomiA, 19(1), 1-11.

McDonald, J. & Stokes, H. (2015). Monetary Policy, Fiscal Policy, and the Housing Bubble. Modern Economy, 6, 165-178.

Melicher, R.W., & Norton, E.A. (2013). Introduction to Finance: Markets, Investments, and Financial Management. Hoboken, USA: John Wiley and Sons

Omofa, M. (2017). An Assessment of the Effect of Financial Sector Development on Growth and Unemployment in Nigeria: 1986-2012. Open Journal of Business and Management, 5, 34-50.

Sequeira, J.M. (2021). Monetary policy surprises, stock returns, and financial and liquidity constraints, in an exchange rate monetary policy system. The Quarterly Review of Economics and Finance, 81(1), 226-236.

Song, M., Ma, X., Shang,Y., Zhao, X. (2020). Influences of land resource assets on economic growth and fluctuation in China. Resources Policy, 68(1) , 70-79.

Stimson, R.J., Stough, R.R., & Roberts, B.H. (2013). Regional Economic Development: Analysis and Planning Strategy. Cham,Switzerland: Springer

Viphindrartin, S. (2021). Impact of Macro Economy on Financial Stability in Malaysia. Tamansiswa Management Journal International. 1(1). 34-38.

Villanthenkodath, M.A. & Mahalik, M.K. (2021). Does economic growth respond to electricity consumption asymmetrically in Bangladesh? The implication for environmental sustainability. Energy, 233(1), 21-42.

Vroey, M.D. (2016). A History of Macroeconomics from Keynes to Lucas and Beyond. New York, USA: Cambridge University Press

Widarni, E.L. & Bawono, S. (2021). Human Capital, Technology, and Economic Growth: A Case Study of Indonesia. The Journal of Asian Finance, Economics and Business. 8 (5). 29-35.

Xu, Q. (2020). Macro Monetary Policy and Micro Corporate Behavior. Modern Economy, 11, 740-749.

Downloads

Published

2021-06-30

How to Cite

Wilantari, R. N., & Afriani, I. H. (2021). Monetary and fiscal policy mix connectivity towards the business cycle in Indonesia. Jurnal Perspektif Pembiayaan Dan Pembangunan Daerah, 9(2), 139 - 152. https://doi.org/10.22437/ppd.v9i2.11489