The Negative Influence of the Amount of Currency in Circulation

Oct 13, 2025 by wbrum.org 78 views

Introduction

The rapid development of technology has led to a significant transformation in the payment system, particularly in the non-cash payment system. This payment system is a crucial component of the global economy and is a key program of Bank Indonesia to increase the use of non-cash payment systems, ultimately aiming to achieve better national economic growth. The non-cash payment system has become increasingly popular in recent years, with more people opting for digital payment methods such as mobile banking and e-wallets.

Background

The non-cash payment system has been growing rapidly in Indonesia, with the number of ATMs, debit cards, and credit cards in circulation increasing significantly over the years. This growth has been driven by the increasing demand for digital payment methods, which are safer, more efficient, and convenient. The use of non-cash payment systems has several benefits, including increased transaction efficiency, reduced cash handling costs, and improved security.

Research Objectives

This study aims to examine the effect of several variables, including the amount of currency in circulation, the number of ATMs and debit cards in circulation, and the number of credit cards in circulation on Indonesia's economic growth. The analysis was carried out using a multiple linear regression model with the Ordinary Least Square (OLS) approach using EViews 9 software.

Methodology

The data used in this study was secondary data obtained from the Bank Indonesia website, covering the period from the first quarter of 2009 to the fourth quarter of 2014. The analysis was carried out using a multiple linear regression model, which is a statistical technique used to model the relationship between a dependent variable and one or more independent variables.

Hypothesis Testing

The results of the hypothesis testing are presented below:

Effect Analysis

1. The Negative Influence of the Amount of Currency in Circulation

The results showed that an increase in the amount of circulating currency did not contribute positively to economic growth. This could be caused by the tendency of the community to switch from cash transactions to non-cash transactions, which are safer and more efficient. For example, in this digital age, payments through mobile banking applications or e-wallets are increasingly in demand, thereby reducing the need for cash in daily transactions.

2. Positive Impact of the Number of ATMs and Debit Cards

The number of ATMs and debit cards in circulation has a positive influence on economic growth. This shows that the more ATM machines and debit cards are available, the higher the public access to banking services. Easy access will facilitate transactions and increase public confidence in the banking system, which in turn encourages increased economic activity.

3. Credit Card Contribution

Credit cards, which facilitate the purchase of goods and services on credit, also have a significant positive impact. The existence of a credit card allows the public to make a purchase without having to directly pay cash, thus encouraging consumption growth. High consumption contributes directly to economic growth.

Conclusion

Based on the results of this study, it can be concluded that the strengthening of the non-cash payment system is very important for Indonesia's economic growth. For this reason, banks in Indonesia need to work together with Bank Indonesia to increase the use of non-cash payment systems. This includes an increase in the number of ATM machines, as well as education to the public about the benefits and ease of using an electronic-based payment system.

Recommendations

Based on the findings of this study, the following recommendations are made:

Increase the number of ATM machines to improve public access to banking services.
Educate the public about the benefits and ease of using an electronic-based payment system.
Promote the use of non-cash payment systems to reduce cash handling costs and improve security.

Limitations

This study has several limitations, including:

Limited data availability: The data used in this study was limited to the period from 2009 to 2014.
Limited variables: The study only examined the effect of three variables on economic growth.

Future Research Directions

Future research should aim to:

Examine the effect of other variables on economic growth, such as the number of mobile banking users and the amount of e-commerce transactions.
Investigate the impact of non-cash payment systems on economic growth in other countries.

References

Bank Indonesia. (2014). Annual Report 2014.
World Bank. (2014). World Development Indicators 2014.
International Monetary Fund. (2014). World Economic Outlook 2014.

Appendices

Appendix A: Data Description
Appendix B: Regression Results
Appendix C: Hypothesis Testing Results

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Introduction

The non-cash payment system has become increasingly popular in Indonesia, with more people opting for digital payment methods such as mobile banking and e-wallets. This shift towards non-cash payment systems has raised questions about its impact on Indonesia's economic growth. In this article, we will answer some of the frequently asked questions (FAQs) about the effect of non-cash payment system on Indonesia's economic growth.

Q1: What is the non-cash payment system?

A1: The non-cash payment system refers to the use of digital payment methods such as mobile banking, e-wallets, and credit cards to make transactions, rather than using cash.

Q2: What are the benefits of the non-cash payment system?

A2: The non-cash payment system has several benefits, including increased transaction efficiency, reduced cash handling costs, and improved security.

Q3: How does the non-cash payment system affect economic growth?

A3: The non-cash payment system can have a positive impact on economic growth by increasing transaction efficiency, reducing cash handling costs, and improving security. This can lead to increased economic activity and growth.

Q4: What are the limitations of the non-cash payment system?

A4: The non-cash payment system has several limitations, including limited access to digital payment methods, limited financial literacy, and limited trust in digital payment systems.

Q5: How can the non-cash payment system be promoted in Indonesia?

A5: The non-cash payment system can be promoted in Indonesia by increasing access to digital payment methods, educating the public about the benefits and ease of use of digital payment systems, and providing incentives for businesses to adopt digital payment systems.

Q6: What are the challenges of implementing the non-cash payment system in Indonesia?

A6: The challenges of implementing the non-cash payment system in Indonesia include limited infrastructure, limited financial literacy, and limited trust in digital payment systems.

Q7: How can the government support the development of the non-cash payment system in Indonesia?

A7: The government can support the development of the non-cash payment system in Indonesia by providing incentives for businesses to adopt digital payment systems, investing in infrastructure, and educating the public about the benefits and ease of use of digital payment systems.

Q8: What are the potential risks of the non-cash payment system?

A8: The potential risks of the non-cash payment system include cyber attacks, data breaches, and system failures.

Q9: How can the non-cash payment system be secured?

A9: The non-cash payment system can be secured by using encryption, two-factor authentication, and other security measures to protect against cyber attacks and data breaches.

Q10: What is the future of the non-cash payment system in Indonesia?

A10: The future of the non-cash payment system in Indonesia is promising, with more people opting for digital payment methods and the government investing in infrastructure and education to support the development of the non-cash payment system.

Conclusion

The non-cash payment system has become increasingly popular in Indonesia, with more people opting for digital payment methods such as mobile banking and e-wallets. This shift towards non-cash payment systems has raised questions about its impact on Indonesia's economic growth. In this article, we have answered some of the frequently asked questions (FAQs) about the effect of non-cash payment system on Indonesia's economic growth.

References

Bank Indonesia. (2014). Annual Report 2014.
World Bank. (2014). World Development Indicators 2014.
International Monetary Fund. (2014). World Economic Outlook 2014.

Appendices

Appendix A: Data Description
Appendix B: Regression Results
Appendix C: Hypothesis Testing Results