The Role of Monetary Policy Instruments in Maintaining Indonesia's Economic Growth
Keywords:
Economic Growth, Monetary Policy, Inflation, BI-7 Day Reverse Repo Rate, Money Supply, Exchange Rate.Abstract
This study aims to analyze the role of monetary policy instruments consisting of inflation, BI-7 Day Reverse Repo Rate (BI7DRR), money supply (M2), and exchange rate on Indonesia's economic growth. The study uses a quantitative approach with multiple linear regression method based on secondary annual time series data for the period 2010–2025 obtained from Bank Indonesia, Statistics Indonesia (BPS), and the World Bank. The results show that inflation has a negative and significant effect on economic growth with a regression coefficient of -0.245 and a significance value of 0.028. BI7DRR also has a negative and significant effect with a coefficient of -0.318 and a significance of 0.014. Meanwhile, money supply (M2) has a positive and significant effect on economic growth with a coefficient of 0.412 and a significance of 0.005. The exchange rate has a negative and significant effect on economic growth with a coefficient of -0.176 and a significance of 0.041. Simultaneously, all four variables have a significant effect on economic growth with an F-value of 18.742 and a significance of 0.001. The coefficient of determination (R²) of 0.843 indicates that 84.3% of the variation in economic growth can be explained by inflation, BI7DRR, money supply, and the exchange rate, while the remaining 15.7% is influenced by factors outside the research model. The research results confirm that monetary policy instruments play a crucial role in maintaining stability and driving sustainable economic growth in Indonesia.
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