Abstract
This study investigates the money demand function in Indonesia for the period 1985-2016. In this period many financial liberalizations took place and it includes the 1997 Asian financial crisis and global financial crisis of 2007-2008. This study aims to re-examine the money demand stability in Indonesia. Empirical results suggest that there exists a cointegration relationship between real narrow money and its determinants. This study shows that income and interest rate elasticities are consistent with the theory of money demand. The Gregory-Hansen cointegration approach suggests that narrow money demand occurs structural breaks in 2008 and 2012 which are compatible with global financial crisis and financial liberalization in Indonesia.

Abstract
This study investigates the money demand function in Indonesia for the period 1985-2016. In this period many financial liberalizations took place and it includes the 1997 Asian financial crisis and global financial crisis of 2007-2008. This study aims to re-examine the money demand stability in Indonesia. Empirical results suggest that there exists a cointegration relationship between real narrow money and its determinants. This study shows that income and interest rate elasticities are consistent with the theory of money demand. The Gregory-Hansen cointegration approach suggests that narrow money demand occurs structural breaks in 2008 and 2012 which are compatible with global financial crisis and financial liberalization in Indonesia.

Chapter 1 1
Introduction 1
1.1. Historical background of Indonesian economy 1
1.2. Study Questions 10
1.3. Purposes of this Study 11
Chapter 2 12
Literature Review 12
Chapter 3 15
Econometrics Methods 15
3.1. Unit root test 15
3.2. Cointegration Test 16
3.3. Vector Error Correction Model 18
Chapter 4 19
Data and Empirical Results 19
4.1. Data 19
4.2. Unit Root Test 19
4.3. Cointegration Test 21
4.4. Vector Error Correction Model 28
Chapter 5 35
Conclusion 35
References 38

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