The Effect of Monetary Indicators and Digitalization on Government Spending in Indonesia with The Ordinary Least Squares (OLS) Approach

Abstract

This study aims to analyze the influence of inflation and the use of e-money on government spending in Indonesia in the context of fiscal digital transformation. In the era of digitalization and macroeconomic dynamics, understanding the role of monetary indicators and digital financial instruments is important in supporting the effectiveness of state fiscal policies. This study uses a quantitative approach with the Ordinary Least Squares (OLS) linear regression method based on quarterly time series data for the 2020–2024 period obtained from the Central Statistics Agency (BPS), Bank Indonesia (BI), and the Ministry of Finance of the Republic of Indonesia. The variables used consisted of inflation (X₁), e-money (X₂), and government spending (Y). The results of the analysis show that partially or simultaneously, inflation and e-money do not have a significant effect on government spending at a significant level of 5%. The R-squared value of 0.087077 indicates that the variation in government spending can only be explained by 8.7% by independent variables in this model, while the rest is influenced by other factors outside the model. Classical assumption tests show that the model is free of normally distributed multicollinearity, heteroscedasticity, autocorrelation, and residual. These findings indicate the need for further exploration of other variables that are more relevant in explaining the dynamics of government spending in the digital era. This research is expected to make an empirical contribution to the development of fiscal policies that are more adaptive to technological changes and macroeconomic conditions.