Digital Payments, Money Demand, and SDGs in Indonesia

Sista   Septiani Fabian; Amir machmud; Agung Setiawan; Qudratov  Inomjon; Ablatdinov Sultanbek  Azatovich

doi:10.15408/etk.v25i2.50765

Authors

Sista Septiani Fabian Universitas Pendidikan Indonesia
Amir machmud Universitas Pendidikan Indonesia
Agung Setiawan Universitas Pendidikan Indonesia
Qudratov Inomjon Tashkent State University of Economics
Ablatdinov Sultanbek Azatovich Tashkent State University of Economics

DOI:

https://doi.org/10.15408/etk.v25i2.50765

Keywords:

electronic money, Currency substitution, portfolio substitution, ARDL bounds testing, financial inclusion, mutual fund net asset value

Abstract

Research Originality: This study is the first to jointly model three monetary aggregates against multiple digital payment instruments and a portfolio-substitution channel within a single emerging-market framework

Research Objectives: This study investigates the effect of payment digitalization on money demand (M0, M1, M2) in Indonesia over 2013–2025

Research Method: The Autoregressive Distributed Lag (ARDL) bounds testing approach is applied to monthly data from January 2013 to December 2025, capturing short-run dynamics and long-run equilibrium simultaneously.

Empirical Results: Rising electronic money volumes significantly reduce narrow money demand (M0 and M1) in both horizons, consistent with a currency substitution effect. Credit card usage correlates positively with broad money demand (M2) through credit intermediation. In contrast, money market mutual fund Net Asset Value exerts a portfolio-substitution effect on M2—the first direct empirical evidence for this channel in Indonesia. Real gross domestic product and the central bank reference rate align with liquidity preference predictions.

Implications: Central banks must integrate digital payment indicators into money demand modeling. Payment digitalization advances SDG 8, SDG 10, and SDG 17 through financial inclusion and systemic efficiency.

JEL Classification: D80, E58, F31

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