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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 finding 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 suggests that the effect on income velocity is mostly over the long-run as most determinants are dormant in the short-run. The implication from a policy perspective is that shocks are unlikely to burden income velocity over short time horizons..

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