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ABSTRACT
This paper analyses the money supply in Indonesia for the period 1990 –
2002. Having analyzed yearly and quarterly data, we discovered
independence between government spending, foreign reserves, and the
money multiplier. This reflects the evolving nature of a transmission
mechanism between monetary and real variables on the one hand and the
accommodative character of monetary policy on the other. The result using log
model show that government spending is positively and significantly related to
the money supply (1990-1997). For the entire period, government spending is
still have a positive and significant effect on money supply while the money
multiplier has no significant effect (1990-2002).
Ln M2 = α0 + α1 Ln G + α2 Ln Rd+ α3 Ln mm (1)
M C + D + QM
mm = = ............................................. (2)
H C+ R
Dimana,