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Beyond monetary policy: how social security and bank credit drive money supply in Indonesia
(1) Department of Economics, Faculty of Economics and Business, Universitas Brawijaya, Malang
(2) Department of Economics, Faculty of Economics and Business, Universitas Brawijaya, Malang
(*) Corresponding Author
Abstract
This study investigates the determinants of broad money supply (M2) in Indonesia, focusing on fiscal policy, banking intermediation, non-cash payment instruments, and monetary policy. Monthly data from January 2016 to December 2024 are analyzed using the Autoregressive Distributed Lag (ARDL) bounds testing approach to examine short- and long-run relationships. The results show that credit disbursement, third-party funds, and social security spending have positive and statistically significant effects on M2 in the long run. In contrast, village funds, debit/ATM cards, credit cards, and the reserve requirement have no significant effects in either the short or long run. The error correction term of −1.422 indicates rapid adjustment toward long-run equilibrium, while the model explains 92.7% of M2 variation (R² = 0.927). This study contributes empirical evidence on the role of social security in M2 dynamics by integrating fiscal, banking, payment, and monetary variables within a single ARDL framework. The findings highlight the importance of banking intermediation and targeted fiscal transfers in shaping long-run liquidity and underscore the need for policy coordination among the government, Bank Indonesia, and the Financial Services Authority (OJK).
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DOI: https://doi.org/10.24123/mabis.v25i3.1132
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