In e na ional Jou nal o Social Science and Human Resea ch
ISSN (p in ): 2644-0679, ISSN (online): 2644-0695
Volume 08 Issue 11 No embe 2025
DOI: 10.47191/ijssh / 8-i11-26, Impac ac o - 8.007
Page No: 8720-8726
IJSSHR, Volume 08 Issue 11 No embe 2025 www.ijssh .in Page 8720
Analyzing he In e ac ion Be ween Mone a y Agg ega es (M1, M2) and
Expendi u e Componen s on GDP in De eloping Economies: E idence om
Indonesia
Jan Ho as Ve yady Pu ba
Facul y o Business, Ins i u Bisnis dan In o ma ika Kesa uan, Bogo , Indonesia
ABTRACT: This s udy aims o examine he in eg a ed impac o mone a y agg ega es and mac oeconomic expendi u e componen s
on Indonesia’s G oss Domes ic P oduc (GDP) in 2025. By employing mul iple eg ession models, he esea ch e alua es he
e ec i eness o na ow money (M1), b oad money (M2), consump ion (C), in es men (I), go e nmen spending (G), and ne
expo s (X) in d i ing economic g ow h. The analysis is g ounded in he agg ega e expendi u e amewo k and mone a y
ansmission heo y, o e ing a comp ehensi e empi ical app oach o assess he syne gy be ween iscal and mone a y policy. The
esul s e eal ha consump ion, in es men , and M1 ha e a posi i e and s a is ically signi ican e ec on GDP, wi h consump ion
eme ging as he mos dominan con ibu o . M1 also demons a es s ong ansmission powe in s imula ing household consump ion,
while M2 shows no signi ican impac , indica ing i s limi ed ole in sho - e m g ow h. Go e nmen spending and ne expo s
con ibu e posi i ely, hough hei e ec s a e ela i ely mode a e. The eg ession models exhibi high explana o y powe , wi h R²
alues exceeding 0.99 and obus F-s a is ics, con i ming he eliabili y o he in eg a ed amewo k. These indings suppo he
s a egic di ec ion o Indonesia’s economic policy unde P esiden P abowo, which emphasizes domes ic demand and p oduc i e
in es men . The s udy alida es he e ec i eness o liquidi y injec ions h ough M1 and iscal eposi ioning in accele a ing money
ci cula ion and boos ing eal sec o ac i i y. Academically, he esea ch con ibu es o mac oeconomic li e a u e by cons uc ing a
simul aneous model ha in eg a es mone a y and expendi u e a iables. P ac ically, i p o ides a da a-d i en ounda ion o policy
o mula ion in de eloping economies unde going s uc u al e o m. The s udy ecommends u he esea ch on long- e m dynamics
and c oss-coun y compa isons o e alua e he b oade implica ions o mone a y ins umen s in achie ing inclusi e and sus ainable
g ow h. O e all, he in eg a ed app oach o e s aluable insigh s o s eng hening Indonesia’s mac oeconomic esilience and
achie ing i s a ge ed 8% g ow h a e.
KEYWORDS: G oss Domes ic P oduc , Money Supply (M1 and M2), Consump ion, In es men
I. INTRODUCTION
Indonesia’s economic g ow h in 2025 has demons a ed no able esilience amid global p essu es. Acco ding o da a om
S a is ics Indonesia, he coun y’s yea -on-yea (YoY) economic g ow h eached 4.87% in he i s qua e o 2025, wi h majo
con ibu ions om he ag icul u e, ade, and inancial se ices sec o s. Household consump ion emained he p ima y d i e o
g ow h, expanding by 4.89%, while in es men (G oss Fixed Capi al Fo ma ion) and expo s o goods and se ices g ew by 2.12%
and 6.78%, espec i ely (BPS, 2025).
On he o he hand, low in la ion a 1.6% and he s abili y o he upiah exchange a e e lec he e ec i eness o mone a y policy
implemen ed by Bank Indonesia (Bank Indonesia, 2025). Da a om CEIC indica es ha M2 g ow h eached 5.9% YoY in Janua y
2025, signaling a mode a e ye s able mone a y expansion (CEIC, 2025; Tempo, 2025).The iscal policy adop ed by Finance
Minis e Pu baya Yudhi Sadewa in 2025 ma ks a s a egic shi in he managemen o na ional liquidi y. One o he mos signi ican
measu es was he wi hd awal o IDR 200 illion in go e nmen unds om Bank Indonesia o comme cial banks, aimed a
accele a ing he ci cula ion o money in he eal sec o . This policy, epo ed by Tempo English (2025), di ec ly a ec s mone a y
agg ega es, pa icula ly M1 and M2, which se e as key a iables in his s udy. Wi h inc eased liquidi y in he banking sys em, i is
expec ed ha household consump ion and in es men — wo majo componen s o mac oeconomic expendi u e—will ise and
con ibu e signi ican ly o G oss Domes ic P oduc (GDP) (Kompas.id, 2025).
This mo e also e lec s a c i ique o p e ious mone a y and iscal app oaches, which we e conside ed o e ly conse a i e and
insu icien ly esponsi e o domes ic needs. In an in e iew wi h Bisnis.com (2025), Pu baya emphasized ha o e 90% o
Analyzing he In e ac ion Be ween Mone a y Agg ega es (M1, M2) and Expendi u e Componen s on GDP in
De eloping Economies: E idence om Indonesia
IJSSHR, Volume 08 Issue 11 No embe 2025 www.ijssh .in Page 8721
Indonesia’s economic ac i i y is d i en by domes ic demand, and he e o e, iscal policy mus be di ec ed owa d suppo ing
pu chasing powe and encou aging p oduc i e in es men . In his con ex , esea ch on he in e ac ion be ween money supply and
mac oeconomic expendi u e componen s becomes highly ele an , as i p o ides empi ical e idence on whe he such policies uly
impac economic g ow h.
Gi en he dynamic policy landscape and he ocus on s eng hening he eal sec o , his s udy is no only academically signi ican
bu also p ac ically aluable in e alua ing he e ec i eness o ecen iscal and mone a y s a egies. The analysis o he ela ionship
be ween M1, M2, consump ion, in es men , and GDP can se e as a ounda ion o o mula ing mo e a ge ed and da a-d i en
policies. Mo eo e , his esea ch con ibu es o he de elopmen economics li e a u e, pa icula ly in he con ex o de eloping
coun ies unde going s uc u al e o m owa d inclusi e and sus ainable g ow h (Ma hema ics Jou nal – MDPI, Ama al e al., 2022).
P esiden P abowo Subian o has se an ambi ious a ge o aise Indonesia’s economic g ow h o 8%, a igu e well abo e he
his o ical a e age o a ound 5%. In a ious o ums, including he Na ional De elopmen Planning Mee ing (Mus enbangnas) o
RPJMN 2025–2029, he emphasized ha high g ow h is essen ial o Indonesia o escape he middle-income ap and achie e
de eloped coun y s a us (CNBC Indonesia, 2025; Kompas.id, 2025). This a ge is no me ely symbolic bu se es as he basis o
mo e agg essi e and ocused iscal and mone a y policy o mula ion. In his con ex , you esea ch becomes highly ele an as i
examines whe he mone a y ins umen s and mac oeconomic expendi u e can signi ican ly d i e GDP.
To achie e his goal, P esiden P abowo has ins uc ed Finance Minis e Pu baya Yudhi Sadewa o accele a e money ci cula ion
and enhance he e ec i eness o go e nmen spending. A conc e e s ep was he eposi ioning o go e nmen unds om Bank
Indonesia o comme cial banks, aimed a boos ing liquidi y and s imula ing consump ion and in es men (Tempo.co, 2025). You
s udy, which in es iga es he ela ionship be ween M1, M2, consump ion, and in es men and hei impac on GDP, can se e as an
empi ical e alua ion ool o he e ec i eness o his policy. I i is p o en ha M1 and consump ion signi ican ly in luence GDP,
hen he liquidi y injec ion policy can be conside ed well- a ge ed.
Fu he mo e, P abowo has s essed he impo ance o high-mul iplie sec o s such as housing, cons uc ion, and MSMEs as
engines o g ow h. Expendi u e componen s like go e nmen spending (G) and in es men (I) a e cen al o his s a egy. You
esea ch, which in eg a es a iables C, G, I, and X in o an agg ega e expendi u e model, can p o ide a comp ehensi e pic u e o
how iscal and mone a y policies in e ac o d i e g ow h. Thus, his s udy no only add esses academic ques ions bu also con ibu es
di ec ly o suppo ing he na ional de elopmen agenda se o h by P esiden P abowo (Kompas.id, 2025; Bisnis.com, 2025).
The e is limi ed empi ical esea ch ha simul aneously in eg a es M1 and M2 wi h mac oeconomic expendi u e componen s in
de eloping coun ies. Few s udies link Indonesia’s 2025 iscal liquidi y injec ion o changes in consump ion and in es men
beha io , no do hey quan i y he mone a y ansmission om money supply o household consump ion. Addi ionally, he e is a
lack o comp ehensi e models combining mone a y and expendi u e a iables, and no academic e alua ion o Indonesia’s 8%
g ow h a ge om a policy eadiness pe spec i e.
Resea ch Objec i es:
1. To analyze he impac o mac oeconomic expendi u e componen s (consump ion, go e nmen spending, in es men , and ne
expo s) on he g ow h o G oss Domes ic P oduc (GDP) in Indonesia.
2. To examine he con ibu ion o mone a y agg ega es (M1 and M2) in in luencing GDP bo h di ec ly and h ough he
consump ion a iable.
3. To e alua e he ela ionship be ween money supply (M1) and household consump ion as a mone a y ansmission channel o
he eal sec o .
4. To de elop an empi ical model ha in eg a es mone a y and expendi u e a iables o explain he dynamics o economic g ow h
in de eloping coun ies.
Using a quan i a i e app oach and mac oeconomic da a analysis o Indonesia, his s udy is expec ed o p o ide bo h academic
and p ac ical con ibu ions in s eng hening he ounda ion o na ional economic policy owa d he ision o Indonesia as a de eloped
coun y by 2045.
II. METHOD
This s udy adop s a quan i a i e app oach suppo ed by mac oeconomic da a om au ho i a i e na ional sou ces. I aims o
empi ically examine he ela ionship be ween mone a y agg ega es and mac oeconomic expendi u e componen s in d i ing
Indonesia’s GDP g ow h, as ou lined in he ollowing me hodology.
a. Design and Da a
The esea ch design is explana o y, aiming o analyze causal ela ionships be ween mone a y agg ega es (M1 and M2),
mac oeconomic expendi u e componen s (C, G, I, X), and G oss Domes ic P oduc (GDP). This s udy u ilizes seconda y da a
ob ained om se e al au ho i a i e sou ces. Mac oeconomic indica o s such as G oss Domes ic P oduc (GDP), household
consump ion, in es men , go e nmen spending, and expo s a e sou ced om S a is ics Indonesia (BPS). Da a on mone a y
agg ega es, speci ically M1 and M2, a e collec ed om Bank Indonesia and CEIC Da a, which p o ide comp ehensi e inancial
Analyzing he In e ac ion Be ween Mone a y Agg ega es (M1, M2) and Expendi u e Componen s on GDP in
De eloping Economies: E idence om Indonesia
IJSSHR, Volume 08 Issue 11 No embe 2025 www.ijssh .in Page 8722
s a is ics. In o ma ion ela ed o iscal policy ac ions, including he eposi ioning o go e nmen unds and liquidi y managemen
s a egies, is de i ed om o icial publica ions and p ess eleases issued by he Minis y o Finance. These da a sou ces ensu e
he eliabili y and ele ance o he empi ical analysis conduc ed in his esea ch.
b. Va iables and Models
The s udy uses h ee in e ela ed eg ession models:
1. Mone a y ansmission o consump ion: C = a + b1 M1 + e1
2. GDP based on mac oeconomic expendi u e: GDP = a + b1 C + b2 G + b3 I + b4 X + e2
3. GDP wi h in eg a ed mone a y a iables: GDP = a + b1 M1 + b2 M2 + b3 C + b4 I + e3
All models a e es ima ed using he o dina y leas squa es (OLS) me hod, wi h diagnos ic es s conduc ed o ensu e s a is ical
alidi y and obus ness
c. Hypo hesis S uc u e
1. H1: M1 has a signi ican posi i e e ec on household consump ion.
2. H2: Consump ion, go e nmen spending, in es men , and expo s posi i ely in luence GDP.
3. H3: M1 and M2 ha e a signi ican posi i e di ec and indi ec e ec on GDP h ough consump ion and in es men .
III. RESULT
1. Mone a y T ansmission o Household Consump ion
This sec ion p esen s he esul s o he i s eg ession model, which analyzes he in luence o na ow money (M1) on household
consump ion. Gi en ha consump ion ep esen s he la ges componen o Indonesia’s GDP, his model se es o e alua e he
e ec i eness o mone a y expansion and iscal liquidi y policies implemen ed in 2025, as e lec ed in he ollowing equa ion.
C = 647928 + 0.898 M1*** R2: 0.948 Fs a = 1066,91
( s a : 14.59) (32.662)
The eg ession esul s e eal ha he a iable M1 has a posi i e and s a is ically signi ican e ec on household consump ion
(C), wi h a coe icien o 0.898. This implies ha e e y one-uni inc ease in M1 leads o a 0.898-uni ise in consump ion, holding
o he ac o s cons an . The s eng h o his ela ionship is suppo ed by a -s a is ic o 32.662, which a exceeds he c i ical h eshold
a he 99% con idence le el (***), con i ming he high s a is ical signi icance o M1’s in luence on consump ion.
The coe icien o de e mina ion (R²) is 0.948, indica ing ha 94.8% o he a ia ion in household consump ion can be explained
by changes in M1. This demons a es he model’s s ong explana o y powe and empi ical ele ance. Fu he mo e, he F-s a is ic
alue o 1066.91 ein o ces he o e all alidi y o he eg ession model, con i ming i s obus ness and sui abili y o policy-o ien ed
analysis.
These indings sugges ha inc eased liquidi y h ough mone a y ins umen s such as M1 has he po en ial o signi ican ly
s imula e household consump ion. In he con ex o Indonesia’s 2025 economic s a egy, he esul s suppo he e ec i eness o
mone a y expansion and iscal liquidi y injec ions in s eng hening domes ic demand. Acco dingly, managing M1 eme ges as a
s a egic ool o p omo ing economic s abili y and g ow h h ough he consump ion channel.
F om a heo e ical s andpoin , he esul s align wi h bo h Keynesian and mone a is amewo ks, which posi ha inc eased
liquidi y enhances pu chasing powe and d i es consump ion (Keynes, 1936; F iedman, 1968). In Indonesia’s case, he indings
a i m ha mone a y ansmission ia M1 is highly e ec i e in boos ing domes ic demand. This also alida es iscal and mone a y
policies ha channel go e nmen unds in o comme cial banks o accele a e money ci cula ion.
The indings a e pa icula ly ele an o he economic agenda o P esiden P abowo, who emphasize domes ic demand as he
p ima y engine o economic g ow h. Wi h household consump ion con ibu ing o e 50% o Indonesia’s GDP, expanding M1
becomes a s a egic le e o achie e he a ge ed 8% g ow h a e. This s udy p o ides empi ical e idence ha liquidi y-d i en
policies can di ec ly and e ec i ely in luence household consump ion.
2. Mac oeconomic Expendi u e Componen s and Thei Impac on GDP
This sec ion p esen s he esul s o he second eg ession model, which e alua es he con ibu ion o key mac oeconomic
expendi u e componen s—consump ion (C), go e nmen spending (G), in es men (I), and ne expo s (X)— o Indonesia’s GDP.
By applying he agg ega e expendi u e amewo k, he analysis aims o iden i y which componen s ha e he mos signi ican impac
on economic g ow h, o e ing insigh s in o he s uc u al d i e s o GDP in 2025, as speci ied in he ollowing equa ion.
GDP = -99591 + 1.140 C*** + 0.582G*** + 0.667 I*** + 0.510X*** R2: 0.99 Fs a = 12734, 60
(-5.428) (22.342) (5.188) (7.697) (6.666)
The eg ession esul s indica e ha all mac oeconomic expendi u e componen s—namely consump ion (C), go e nmen
spending (G), in es men (I), and ne expo s (X)—ha e a posi i e and s a is ically signi ican e ec on G oss Domes ic P oduc
(GDP). The coe icien s o each a iable a e as ollows: consump ion (1.140), go e nmen spending (0.582), in es men (0.667),
and expo s (0.510). This means ha a one-uni inc ease in each a iable will aise GDP by he co esponding coe icien alue,
Analyzing he In e ac ion Be ween Mone a y Agg ega es (M1, M2) and Expendi u e Componen s on GDP in
De eloping Economies: E idence om Indonesia
IJSSHR, Volume 08 Issue 11 No embe 2025 www.ijssh .in Page 8723
assuming o he a iables emain cons an (ce e is pa ibus). The a ia ion in coe icien alues among he expendi u e componen s
e lec s hei ela i e con ibu ions o Indonesia’s GDP g ow h. Consump ion (C) holds he highes coe icien a 1.140, indica ing
ha inc eases in household spending ha e he mos subs an ial impac on na ional ou pu . In es men (I), wi h a coe icien o 0.667,
ollows as a key d i e o economic expansion h ough capi al o ma ion. Meanwhile, go e nmen spending (G = 0.582) and ne
expo s (X = 0.510) also con ibu e posi i ely, hough hei e ec s a e mo e mode a e compa ed o consump ion and in es men .
These indings sugges ha de elopmen s a egies p io i izing domes ic demand and in es men s imula ion a e likely o be
mo e e ec i e in accele a ing economic g ow h. The dominan ole o consump ion unde sco es he impo ance o main aining
household pu chasing powe , while s ong in es men pe o mance equi es a conduci e business en i onmen . Go e nmen
spending emains ele an o suppo ing public sec o ini ia i es, and ne expo s should be enhanced h ough di e si ica ion and
imp o ed compe i i eness. O e all, he eg ession esul s p o ide a solid empi ical ounda ion o o mula ing a ge ed and da a-
d i en iscal and mone a y policies.
All independen a iables in his model demons a e s ong s a is ical signi icance (***), as e lec ed in hei espec i e -
s a is ics: consump ion (22.342), go e nmen spending (5.188), in es men (7.697), and expo s (6.666). These alues a exceed
he c i ical h eshold a he 99% con idence le el, con i ming ha each componen con ibu es signi ican ly o GDP.
The model yields a coe icien o de e mina ion (R²) o 0.99, indica ing ha 99% o he a ia ion in GDP can be explained by
he ou a iables. The F-s a is ic o 12,734.60 u he con i ms he o e all signi icance and explana o y powe o he model. These
indings ein o ce he alidi y o he agg ega e expendi u e app oach in explaining Indonesia’s economic g ow h and p o ide a
s ong empi ical ounda ion o o mula ing iscal and in es men policies aimed a s eng hening agg ega e demand.
3. In eg a ed Mone a y Va iables in GDP De e mina ion
This sec ion e alua es he di ec and indi ec e ec s o mone a y agg ega es (M1 and M2), consump ion (C), and in es men (I)
on GDP, ep esen ing an in eg a ed empi ical amewo k ha combines mone a y policy and mac oeconomic expendi u e. The
analysis is based on he ollowing eg ession equa ion.
GDP = 161700 + 0.362 M1*** + 0.012 M2 + 1.061 C*** + 0.545 I*** R2: 0.998 Fs a = 6224,598
(4.288) (3.321) (0.226) (9.278) (7.288)
The eg ession model indica es ha GDP is signi ican ly in luenced by he a iables M1, consump ion (C), and in es men (I),
wi h espec i e coe icien s o 0.362, 1.061, and 0.545. These h ee a iables a e ma ked wi h ***, deno ing high s a is ical
signi icance a he 99% con idence le el, suppo ed by s ong -s a is ics: M1 (4.288), C (9.278), and I (7.288). This implies ha a
one-uni inc ease in M1, consump ion, o in es men leads o a measu able ise in GDP, wi h consump ion exe ing he g ea es
impac .
In con as , he a iable M2 shows a e y small coe icien (0.012) and a low -s a is ic (0.226), indica ing ha i s e ec on GDP
is no s a is ically signi ican wi hin his model. This sugges s ha in he con ex o 2025, na ow money (M1) is mo e e ec i e in
d i ing economic g ow h han b oad money (M2), pa icula ly h ough he channels o consump ion and in es men . The model’s
coe icien o de e mina ion (R²) is 0.998, meaning ha 99.8% o he a ia ion in GDP is explained by he ou a iables. The F-
s a is ic o 6,224.598 con i ms he o e all s eng h and eliabili y o he model. These indings ein o ce an in eg a ed app oach o
mone a y and expendi u e policy, p o iding a obus empi ical ounda ion o designing a ge ed iscal and mone a y s a egies o
achie e na ional g ow h objec i es.
IV. RESULT
The i s eg ession indings con i m ha na ow money (M1) plays a c i ical ole in s imula ing household consump ion,
ein o cing he e ec i eness o mone a y ansmission h ough he liquidi y channel. This aligns wi h he heo e ical expec a ions
o bo h Keynesian and mone a is schools, which a gue ha inc eased money supply enhances pu chasing powe and agg ega e
demand. The high s a is ical signi icance o M1 ( -s a is ic = 32.662) and he model’s s ong explana o y powe (R² = 0.948) sugges
ha mone a y expansion—pa icula ly h ough ins umen s ha inc ease M1—can be a powe ul le e o boos ing consump ion.
Ni mala e al. (2022) suppo his iew, inding ha mone a y shocks in Indonesia signi ican ly a ec consump ion, especially when
liquidi y is channeled h ough he banking sec o o households and small businesses.
Howe e , he e ec i eness o M1 as a ansmission mechanism also depends on he esponsi eness o economic agen s and he
s uc u e o he inancial sys em. As no ed by He lina e al. (2023), he money supply channel in Indonesia has shown a ying
deg ees o e ec i eness depending on mac oeconomic condi ions and ins i u ional eadiness. In he con ex o 2025, whe e iscal
liquidi y injec ions and go e nmen ans e s a e expec ed o be subs an ial, he syne gy be ween mone a y and iscal policy becomes
c ucial. The empi ical e idence om his s udy suppo s he policy di ec ion o p io i izing domes ic demand. By ensu ing ha
liquidi y eaches he eal sec o —pa icula ly households— h ough M1, policymake s can enhance he eloci y o money and
sus ain consump ion-led g ow h.
The second eg ession esul s a i m ha consump ion, in es men , go e nmen spending, and ne expo s a e all s a is ically
signi ican d i e s o Indonesia’s GDP, wi h consump ion exe ing he s onges in luence. This suppo s he agg ega e expendi u e
Analyzing he In e ac ion Be ween Mone a y Agg ega es (M1, M2) and Expendi u e Componen s on GDP in
De eloping Economies: E idence om Indonesia
IJSSHR, Volume 08 Issue 11 No embe 2025 www.ijssh .in Page 8724
amewo k, whe e household consump ion plays a cen al ole in economic expansion. Acco ding o he Wo ld Bank (2024),
Indonesia’s g ow h esilience in ecen yea s has been la gely buoyed by domes ic demand, pa icula ly p i a e consump ion, which
consis en ly con ibu es o e 50% o GDP. The high coe icien o consump ion (1.140) in his model ein o ces he impo ance o
main aining pu chasing powe h ough inclusi e iscal policies and in la ion con ol.
In es men eme ges as he second mos in luen ial componen , highligh ing i s s a egic ole in long- e m p oduc i i y and
employmen c ea ion. The OECD (2025) no es ha Indonesia’s in es men clima e has imp o ed due o egula o y e o ms and
in as uc u e de elopmen , which a e essen ial o sus aining g ow h amid global unce ain ies. The eg ession coe icien o 0.667
o in es men , along wi h a s ong -s a is ic, sugges s ha capi al o ma ion emains a obus channel o GDP enhancemen . This
inding aligns wi h He lambang e al. (2023), who a gue ha in es men -led g ow h in Indonesia is pa icula ly e ec i e when
suppo ed by s able mac oeconomic condi ions and a ge ed incen i es.
Go e nmen spending and ne expo s also con ibu e posi i ely, hough hei coe icien s a e ela i ely lowe . This indica es
ha while iscal expendi u e and ade pe o mance a e impo an , hei sho - e m impac on GDP is less p onounced compa ed o
consump ion and in es men (Pu ba e al., 2025). None heless, go e nmen spending emains i al o public se ice deli e y and
in as uc u e, especially in imes o economic eco e y. As highligh ed in Bank Indonesia’s SEKI da a (2025), iscal ans e s and
capi al expendi u es ha e played a s abilizing ole du ing pe iods o ex e nal ola ili y. Simila ly, ne expo s—despi e global ade
headwinds—can be le e aged h ough di e si ica ion and alue-added s a egies o enhance compe i i eness.
O e all, he model’s high explana o y powe alida es he agg ega e expendi u e app oach as a eliable ool o policy
o mula ion. The indings sugges ha Indonesia’s g ow h s a egy should p io i ize s eng hening domes ic demand and in es men
while main aining p uden iscal managemen and expo compe i i eness. These insigh s a e consis en wi h he medium- e m
policy p io i ies ou lined by he Wo ld Bank and OECD, which emphasize inclusi e g ow h, s uc u al e o m, and esilience agains
ex e nal shocks. By aligning iscal and mone a y policies wi h hese empi ical d i e s, Indonesia can mo e e ec i ely pu sue i s
2025 g ow h a ge s.
The hi d eg ession esul s demons a e ha M1, consump ion, and in es men a e he mos in luen ial a iables in de e mining
Indonesia’s GDP, while M2 shows no signi ican impac . This inding highligh s he e ec i eness o na ow money (M1) as a
ansmission channel o mone a y policy, pa icula ly in s imula ing eal economic ac i i y h ough household consump ion and
capi al o ma ion. Acco ding o Alam e al. (2021), M1 has a s onge and mo e immedia e e ec on GDP han M2, especially in
economies whe e cash-based ansac ions and liquidi y-sensi i e sec o s domina e. The high coe icien o consump ion (1.061)
u he ein o ces he cen al ole o domes ic demand in Indonesia’s g ow h s uc u e.
The insigni icance o M2 in his model sugges s ha b oade mone a y agg ega es, which include ime deposi s and sa ings,
may no di ec ly in luence sho - e m ou pu . This aligns wi h he indings o Vebiola and Aulia (2024), who a gue ha M2 ends o
a ec GDP indi ec ly h ough in e es a e channels and long- e m in es men beha io , a he han immedia e consump ion. In
con as , M1—comp ising cu ency in ci cula ion and demand deposi s—has a mo e di ec impac on spending decisions. The low
-s a is ic o M2 (0.226) in his s udy con i ms ha i s con ibu ion o GDP is s a is ically negligible in he 2025 con ex , whe e
liquidi y injec ions a e p ima ily aimed a boos ing household and business ac i i y.
The model’s excep ionally high R² alue and F-s a is ic indica e ha he in eg a ed amewo k combining mone a y and
expendi u e a iables o e s a powe ul ool o policy analysis. As no ed by Me ekohy e al. (2022), combining mone a y agg ega es
wi h eal sec o indica o s enhances he p edic i e accu acy o mac oeconomic models, especially in eme ging economies. The
s ong s a is ical signi icance o M1, consump ion, and in es men sugges s ha coo dina ed iscal and mone a y s a egies—such
as go e nmen ans e s h ough comme cial banks and incen i es o p i a e in es men —can e ec i ely d i e GDP g ow h.
The empi ical e idence suppo s a policy mix ha p io i izes liquidi y managemen h ough M1 and ein o ces consump ion and
in es men as g ow h engines. This in eg a ed app oach is consis en wi h he ecommenda ions o Maipi a and Fi awa y (2024),
who emphasize he need o ha monized mac oeconomic ins umen s o a oid policy misalignmen and maximize g ow h ou comes.
Fo Indonesia in 2025, ensu ing ha mone a y expansion ansla es in o eal sec o ac i i y— a he han being abso bed in o sa ings
o specula i e asse s—is c ucial. The eg ession model p o ides a obus ounda ion o designing a ge ed in e en ions ha align
mone a y supply wi h p oduc i e economic beha io .
V. CONCLUSION
This s udy success ully demons a es ha he a iables o consump ion (C), in es men (I), and na ow money (M1) ha e a
posi i e and s a is ically signi ican impac on Indonesia’s G oss Domes ic P oduc (GDP). Consump ion eme ges as he mos
dominan con ibu o , e lec ing he s eng h o domes ic demand as he p ima y engine o economic g ow h. In es men plays a
c ucial ole in d i ing he eal sec o and expanding p oduc ion capaci y, while M1 p o es o be an e ec i e mone a y ins umen
o ansmi ing liquidi y policies o he consump ion sec o . In con as , M2 shows no signi ican e ec , indica ing ha long- e m
mone a y ins umen s a e no ye op imal o suppo ing sho - e m eal economic g ow h.
Analyzing he In e ac ion Be ween Mone a y Agg ega es (M1, M2) and Expendi u e Componen s on GDP in
De eloping Economies: E idence om Indonesia
IJSSHR, Volume 08 Issue 11 No embe 2025 www.ijssh .in Page 8725
These indings di ec ly add ess he esea ch objec i e o e alua ing he e ec i eness o in eg a ing mone a y policy and
agg ega e expendi u e wi hin an empi ical amewo k ele an o Indonesia’s 2025 con ex . The excep ionally high coe icien o
de e mina ion and la ge F-s a is ic alues ein o ce he alidi y o he eg ession models used, highligh ing he s a egic impo ance
o M1, consump ion, and in es men in economic policymaking. The go e nmen ’s policy o eposi ioning public unds in o
comme cial banks, led by Finance Minis e Pu baya Yudhi Sadewa, aligns wi h hese indings, as inc eased M1 con ibu es di ec ly
o GDP. Mo eo e , he esul s suppo P esiden P abowo Subian o’s ision o achie ing 8% economic g ow h by ocusing on
s eng hening domes ic demand and p oduc i e sec o s.
Academically, his esea ch con ibu es signi ican ly o he mac oeconomic li e a u e in Indonesia by cons uc ing a mul iple
eg ession model ha simul aneously in eg a es mone a y and agg ega e expendi u e a iables. P ac ically, he indings p o ide a
da a-d i en ounda ion o o mula ing economic policies, pa icula ly in de eloping coun ies unde going s uc u al e o ms. The
s udy also opens a enues o mo e comp ehensi e u u e esea ch, including long- e m analysis, c oss-pe iod policy e alua ions,
and c oss-coun y compa isons on he e ec i eness o mone a y ins umen s in p omo ing inclusi e and sus ainable economic
g ow h.
ACKNOWLEDGEMENT
The au ho would like o exp ess hei deepes app ecia ion and g a i ude o he Ins i u e o Resea ch and Communi y Se ice
(LPPM) o IBI Kesa uan o he suppo p o ided du ing he implemen a ion o his esea ch. Ins i u ional suppo om LPPM
played a i al ole in ensu ing he smoo h p og ess o he esea ch p ocess, om he planning s age o he comple ion o he inal
epo . I is hoped ha he esul s o his s udy will con ibu e meaning ully o he ad ancemen o scien i ic knowledge and suppo
he ins i u ion’s s a egic agenda in he ields o esea ch and communi y se ice.
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P esen a ion-Pa -A.pd
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