ANALYZING THE INFLUENCE OF INTEREST RATES ON MONEY DEMAND ACCORDING TO KEYNESIAN THEORY
Abstract
The purpose of this research is to analyze the factors that influence money demand which are characterized by the amount of money currency (M1) in Indonesia, one of which is interest rates. The model of observation analysis used in this study is OLS (Ordinary Least Square), as a whole the tests performed are by linear constraint tests, statistical tests and classic assumption tests. In this model, the variable domestic interest rates in Indonesia are used as explanatory components. From these variables examined whether it influences the demand for money (the velocity of money) M1 or not.The results obtained from this study are that domestic interest rates have a negative and significant influence on the demand for money in Indonesia, these results are consistent with Keynesian theory, that interest rates increase, the demand for money for the cash balance will decrease.
Copyright @2021. This is an open-access article distributed under the terms of the Creative Commons Attribution 4.0 International License which permits unrestricted use, distribution, and reproduction in any medium. Copyrights of all materials published in MSDJ are freely available without charge to users or / institutions. Users are allowed to read, download, copy, distribute, search, or link to full-text articles in this journal without asking by giving appropriate credit, provide a link to the license, and indicate if changes were made. All of the remixes, transform, or build upon the material must distribute the contributions under the same license as the original.
