International Journal of

ADVANCED AND APPLIED SCIENCES

EISSN: 2313-3724, Print ISSN: 2313-626X

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 Volume 10, Issue 10 (October 2023), Pages: 46-54

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 Original Research Paper

Does financial digitalization affect macroeconomic stability in Indonesia? An application of the autoregressive distributed lag (ARDL) model

 Author(s): 

 Oktofa Yudha Sudrajad 1, Sudarso Kaderi Wiryono 1, Mandra Lazuardi Kitri 1, Raden Aswin Rahadi 1, Jumadil Saputra 2, *, Triasto Adhinugroho 1

 Affiliation(s):

 1School of Business and Management (SBM), Institut Teknologi Bandung, Bandung, Indonesia
 2Faculty of Business, Economics and Social Development, Universiti Malaysia Terengganu, 21030 Kuala Nerus, Terengganu, Malaysia

  Full Text - PDF 

 * Corresponding Author. 

  Corresponding author's ORCID profile: https://orcid.org/0000-0003-2919-5756

 Digital Object Identifier: 

 https://doi.org/10.21833/ijaas.2023.10.005

 Abstract:

Digitalization has transformed the monetary system more radical for many years. This study aims to investigate the effect of digital payments on macroeconomic stability. Electronic money is used as a proxy for digital payment. The macroeconomic stability is calibrated using exchange rate volatility and inflation rate. This study uses monthly data ranging from January 2009 to March 2020. Macroeconomic data were collected from the Indonesian Central Bureau of Statistics and the Organisation for Economic Co-operation and Development. Industry and market data from the Central Bank of Indonesia (Statistic of Bank Indonesia) and the Indonesian Stock Exchange (IDX). The data were analyzed using the Autoregressive Distributed Lag (ARDL) to examine the long-run and short-run relationship between the studied variables. This study found that digital payments affect Indonesian macroeconomic stability. Electronic money as a proxy of digitalization has a positive and significant relationship with exchange rate volatility and inflation. Cross-border e-commerce might induce exchange rate volatility due to its convenience as a one-stop shopping service and its lower switching cost of currency. The driver of higher inflation is electronic money, which increases people's spending, thus increasing the velocity of circulation and total consumption.

 © 2023 The Authors. Published by IASE.

 This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).

 Keywords: Digital payment, E-money transmission, Macroeconomic stability, Diffusion of innovation theory, Autoregressive distributed lag model

 Article History: Received 1 November 2022, Received in revised form 26 March 2023, Accepted 14 September 2023

 Acknowledgment 

The authors would like to thank the Central Bank of Indonesia for funding this research through the Research Grant from Bank Indonesia in 2020. Also, we would like to thank Universiti Malaysia Terengganu for the excellent collaboration in research and publication. In addition, the authors would like to thank Reza Anglingkusumo, Bastian Muzbar Zams, and Cicilia A. Harun, counterparts from the Central Bank of Indonesia, for giving feedback to improve the paper during the research.

 Compliance with ethical standards

 Conflict of interest: The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

 Citation:

 Sudrajad OY, Wiryono SK, Kitri ML, Rahadi RA, Saputra J, and Adhinugroho T (2023). Does financial digitalization affect macroeconomic stability in Indonesia? An application of the autoregressive distributed lag (ARDL) model. International Journal of Advanced and Applied Sciences, 10(10): 46-54

 Permanent Link to this page

 Figures

 Fig. 1 

 Tables

 Table 1 Table 2 Table 3 Table 4 Table 5 Table 6 Table 7 Table 8 Table 9 Table 10 

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