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Determinants of Indonesia's income velocity of money
Using monthly time-series data and both short-and long-run models, our paper examines the determinants of Indonesia's income velocity of money. Our findings suggest that in the long-run, tax revenue, short-term interest rate, industrial production and, in the short-run, money demand, significantly determine income velocity of money. Our analysis suggest that the effect on income velocity is a mostly over the long-run as most determinants are dormant in the short-run. The implication from a policy perspective is that shock are unlikely to burden income velocity over short time horizons.
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