1
Australian Journal of Basic and Applied Sciences, X(X) Month 2015, Pages: x-x
AUSTRALIAN JOURNAL OF BASIC AND APPLIED
SCIENCES
ISSN:1991-8178
EISSN: 2309-8414
Journal home page: www.ajbasweb.com
MICROFOUNDATION OF MONEY DEMAND: HOUSEHOLD INCOME FACTOR
ANALYSIS
Munawwarah S. Mubarak1, I Made Benyamin2, Sanusi Fattah3, Paulus Uppun4
1
Hasanuddin University, Economic Department, Faculty of Economics & Business,Box 9024 , South Sulawesi, Makassar, Indonesia,
Hasanuddin University, Economic Department, Faculty of Economics & Business,Box 9024 , South Sulawesi, Makassar, Indonesia,
3
Hasanuddin University, Economic Department, Faculty of Economics & Business,Box 9024 , South Sulawesi, Makassar, Indonesia,
4
Hasanuddin University, Economic Department, Faculty of Economics & Business,Box 9024 , South Sulawesi, Makassar, Indonesia,
2
ABSTRACT: This research is intended to know: (1) How much the influence of fixed income,
irregular income and legacy on the demand for holding cash money, both directly and indirectly
through financial investment and consumption of durable goods; (2) How much the influence of
financial investment on the demand for holding cash money, both directly and indirectly through
consumption of durable goods. The unit of analysis are the head of the household who have job and
income and live in the city of Makassar. The method of analysis employed is the estimation method of
simultaneous equation. The research findings indicate that fixed income, irregular income, financial
investment and consumption of durable goods have a positive and significant effect on demand for
holding cash money. Meanwhile, legacy have no significant effect on demand for holding cash money.
Keywords: demand for holding cash money, microfoundation, income and legacy
1. INTRODUCTION
Real money demand plays an important
role in monetary policy in each economy.
Many macroeconomic literature which
already contained the theoretical and
empirical aspects of the demand for money in
many
countries.
Unfortunately,
the
application of the classical theory of money
demand-neoclassical eg Quantity Theory of
Money from Keynes and Irving Fisher to
Baumol-Tobin in macroeconomic analysis
nevertheless always stated that the money
supply is equal to demand money.
Of course the authority of the central
bank as the party who supplied the money
only see the macro variables that affect the
demand for money in running one of its main
tasks to maintain the stability of the economy
with the assumption that, in the long run,
money supply equals money demand. Came
the criticism, is it true that the demand for
public money voluntarily is equal to the
money supply. This issue is crucial for the
study of the determinants of demand for real
money is not only determined on the macro
aspects, but also should be on the side of the
variable microeconomics (Baumol, 1952 and
Tobin, 1956; Mizen, 1997; Shi, 2006;
Carrassal and von Landesberger, 2010; Seitz
and Von Landesberger, 2014).
Demand for money can not be different
from the demand for consumer goods. It
requires research not only on the macro scale,
but also at the micro scale. The need for
research on how people's behavior as
consumers in holding cash because it is
believed that on a macro scale of course
having problems microfoundation.
2.
RESEARCH PROBLEM
Demand money from the classicalneoclassical theory should be also associated
with micro foundation (Mises, 1921). Mises
discovered a missing link between the macro
and micro economy. Mises convinced that the
decisive factor is not only the real money
demand macro variables, but it could also
micro variables such as income and
2
Australian Journal of Basic and Applied Sciences, X(X) Month 2015, Pages: x-x
AUSTRALIAN JOURNAL OF BASIC AND APPLIED
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ISSN:1991-8178
EISSN: 2309-8414
Journal home page: www.ajbasweb.com
demographic factors (Tin 2010 and Dunbar,
2014). Keynes criticized Mises in addition to
the problem of economic depression, also
strongly criticized the classical understanding
of J. B Say who said that supply creates its
own demandnya. Indeed, Mises was dubious
monetary policy authority in determining the
money supply. In this regard, if the money
supply is sufficient to represent the public
demand. Or even an imbalance in money
supply which is always on top of money
demand in the short term certainly lead to
inflation. As a result, there are always errors
in understanding the amount of money needed
by the community (Seitz and Von
Landesberger, 2014). Even the monetarist
doctrine that money neutrality (money supply
equals money demand) in the long term must
be questioned (Keynes, 1936 and Seitz and
Von Landesberger, 2014).
As a result, the implications of the basics
of monetary (central bank authorities) looked
very dictate the need for public money,
because not based on a robust microeconomic
foundations. Not surprisingly, since the past
until today, the source of the economic crisis
in principle is always triggered by the
bubbling action (bubling) in the financial
sector (Seitz and Von Landesberger, 2014).
Demand for money by classical linked to
the money supply, the price of goods, and the
number of traded goods, causing confusion
people to ask for money as a commodity or
fiat money (Fisher, 1928). One bias is
referred to as one of the causes of the money
illusion. The concept of money illusion is the
tendency or propensity for someone to
appraise the money in nominal terms over the
value rillnya. (Keynes, 1936 and Sousa,
2011). Referring to these definitions, it
appears that there is a fundamental
misunderstanding of the behavior of the
demand for money. That is in deciphering the
money, people will be more than happy to see
the extent of the nominal amount of money
rather than how much purchasing power of
the money in playing the main function,
namely as a medium of exchange and a
function other money (Sousa, 2011), Money
illusion is apparently also resulted in
increasingly poor in the economy (Fisher,
1928). It is fundamentally looked impair the
function of money as a measure of value
(labor productivity) and hoarders of wealth.
All of this should be seen from the need for a
presentation on micro foundations of money
demand.
Micro perspective the underlying theory
of demand for money Keynes example only
stated that people's behavior is always looking
for money in addition to the transaction
motive and speculation also with motif
precaution. But in fact, every community
should definitely do have the cash at home or
in their pockets each of which in economic
terms as the demand for holding cash money
(DHCM). Holding cash money is, of course,
not just at the macro level is influenced by the
level of income (GDP) and the interest rate,
but the (micro in fact the interest rate factor is
very skippable) is also affected by the number
of owned savings and consumption behavior
of households. (Friedman, 1956; Anderson,
1976; Ragot, 2010 and Tin, 2010). In
addition, holding cash money can also be
influenced by demographic and income
(Ragot, 2010; Tin 2010 and Carmen, M and
von Landesberger. 2010).
3. RESEARCH QUESTION
Based on the description of the
background of the problem, then the
formulation of the subject matter of this
research are:
1. Is fixed income effect on the demand for
holding cash money either directly or
indirectly through financial investment
as and consumption of durable goods.
2. Is the fixed income does not affect the
demand for holding cash money either
directly or indirectly through financial
3
Australian Journal of Basic and Applied Sciences, X(X) Month 2015, Pages: x-x
AUSTRALIAN JOURNAL OF BASIC AND APPLIED
SCIENCES
ISSN:1991-8178
EISSN: 2309-8414
Journal home page: www.ajbasweb.com
investment as and consumption of
durable goods
3. Do legacy affect the demand for holding
cash money either directly or indirectly
through financial investment as and
consumption of durable goods.
The purpose of this research is:
1. In order to measure, identify and
analyze how much influence the fixed
income to money demand (DHCM),
either directly or indirectly through
financial
investment
as
and
consumption of durable goods.
2. To quantify, identify and analyze
how much influence the income is not
fixed to the demand for money
(DHCM), either directly or indirectly
through financial investment as and
consumption of durable goods.
3. To measure, identify and analyze
how much influence the legacy of the
demand for money (DHCM), either
directly or indirectly through
financial
investment
as
and
consumption of durable goods.
4. METHOD OF RESEARCH
In this study used survey methods, which
gather
information
from
respondents
(sampling) which is expected to represent the
entire population. Information collected from
respondents in this survey method is to use
the questionnaires that had been prepared in
advance. The unit of analysis of this study is
the head of the household who have jobs and
income as the main person in charge of the
financial and domiciled in the city of
Makassar. Thus the population in this study
are all urban households have a
correspondence with the characteristics of
households in the city of Makassar.
Variable income either X1 is a fixed
income, X2 is a non-recurring revenues and
X3 is a legacy (non-working income) is an
exogenous variable. Namely intervening
variables Y1 and Y2 are financial investment
is the consumption of durable goods as well
as endogenous variables which Y3 is a
demand for holding cash money
Y1= f (X1,X2,X3)
Y2= f (X1,X2,X3,Y1)
Y3= f (X1,X2,X3, Y1,Y2)
Where:
X1 = Fixed Income
X2 = Income Is Not Fixed
X3 = legacy
Y1 = Financial Investment
Y2 = Consumption of durable goods
Y3 = Demand for holding cash money
The third function of the above then
compiled preformance form of simultaneous
equation
is
as
follows:
Y1 = α0 + α1X1 + α2X2 + α3X3 + μ1
Y2 = Ω0 + Ω1X1+ Ω2X2 + Ω3X3+ μ12
Y3 = λ0 + λ1X1 + λ2X2 + λ3X3 + μ123
Where:
Ω0 = β0 + α0β1 is a constant
Ω1 = β2 + α1β1 is the total effect on the y2 x1
consisting of a direct influence on the y2 x1
of β2 plus indirect effect through y1 of α1β1.
Ω2 = β3 + α2β1 is the total effect of x2 to y2
consisting of direct influence of x2 to y2 β3
plus indirect effect through y1 of α2β1.
Ω3 = β4 + α3β1 is the total effect on the y2 x3
consisting of a direct influence on the y2 x3
for β4 plus indirect effect through y1 of α3β1.
α0γ1 λ0 = γ0 + + + α0β1γ2 β0γ2 is a constant
λ1 = γ3 + α1γ1 + β2γ2 + α1β1γ2 is the total
effect x1 to y3 which consists of direct
influence x1 to y3 of γ3 plus indirect effect
only through y1 of α1γ1 plus indirect effect
only through y2 of β2γ2 plus indirect effect
through
y1
and
y2
for
α1β1γ2.
λ2 = γ4 + α2γ1 + β3γ2 + α2β1γ2 is the total
effect x2 to y3 which consists of the direct
influence of x2 to y3 of γ4 plus indirect effect
only through y1 of α2γ1 plus indirect effect
only through y2 of β3γ2 plus indirect effect
through
y1
and
y2
for
α2β1γ2.
λ3 = γ5 + α3γ1 + β4γ2 + α3β1γ2 is the total
effect x3 to y3 which consists of direct
influence x3 to y3 of γ5 plus indirect effect
4
Australian Journal of Basic and Applied Sciences, X(X) Month 2015, Pages: x-x
AUSTRALIAN JOURNAL OF BASIC AND APPLIED
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ISSN:1991-8178
EISSN: 2309-8414
Journal home page: www.ajbasweb.com
only through y1 of α3γ1 plus indirect effect
only through y2 of β4γ2 plus indirect effect
through y1 and y2 for α3β1γ2.
Reviews These variables are then defined
as follows: Demand for money / holding cash
money (Y3) is the amount of money demand
of respondents measured by the average cash
held in a month with a unit rupiah. Average
cash this is according to the respondents for 3
(three) months, the head of the household
must be provided in the form of cash to meet
all the needs of household consumption of
non-durable goods.
Consumption of durable goods (Y2) is the
amount of expenses incurred to purchase
durable goods. Durable goods in the form of
tangible goods that normally can last a long
time for the use of consumption or investment
with normal economic age is one year or
better on credit or cash. To that end, the
variable consumption of durable goods is
measured by the total value of the rupiah
against the purchase of various assets that
have been done within 5 (five) years.
Financial Investment (Y1) is the amount of
money set aside for savings, bank deposits
and the purchase of shares or securities and
insurance policies. To that end, the Financial
Investment variable is measured by the total
value of financial assets that have been done
within 5 (five) years.
Fixed income (X1) is a fixed amount of
income that the respondents are measured in
terms of money per month in units of rupiah.
Non-recurring revenues (X2) is the amount of
non-recurring revenues derived respondents
measured in terms of money per month in
units of rupiah.
Legacy (X3) are all treasures controlled
or determined by the heir to the respondent.
This is the legacy variable includes all
properties owned number of respondents
came from other than fixed income and fixed
income is not measured in the value of the
rupiah.
5.
ANALYSIS AND DISCUSSION
We test the hipothesys with Structural
Equation Model (SEM) Figure 1 shown all of
the relationships of variables we analized.
Figure 1 The conceptual framework of
research
5
Australian Journal of Basic and Applied Sciences, X(X) Month 2015, Pages: x-x
AUSTRALIAN JOURNAL OF BASIC AND APPLIED
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ISSN:1991-8178
EISSN: 2309-8414
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Tabel 1. Function Estimation Results Table
Financial Investment (Y1), consumption of
durable goods (Y2), and Demand for holding
cash money (Y3
Directions
Regression
t-Statistic Probability
between
coefficients
Variables
Influence
X 1 => 𝑌1
0,655*
10,476
0,000
X 2 => 𝑌1
0,181*
3,803
0,000
X 3 => 𝑌1
0,126*
5,385
0,000
Y 1 => 𝑌2
0,131
1,145
0,252
X 1 => 𝑌2
0,590*
4,122
0,000
0,079
0,832
0,405
X 2 => 𝑌2
0,097*
2,030
0,042
X 3 => 𝑌2
Y 1 => 𝑌3
0,179*
3,641
0,000
Y 2 => 𝑌3
0,048*
1,898
0,058
X 1 => 𝑌3
0,317*
5,048
0,000
X 2 => 𝑌3
0,102*
2,511
0,012
X 3 => 𝑌3
0,011
0,520
0,603
*) significantly on α = 5%;
R 2𝑌1 = 0,367; constant equation Y1 = -0,468
R 2𝑌2 = 0,128; constant equation Y 2 = 3,198
R2𝑌3 = 0,302 constant equation Y3 = 4,521
N = 289
 Analysis and Implications of Fixed Income
Effect on Demand for holding cash money
Both Direct and Indirect through Financial
Investment and Consumption of Durable
Goods
The direct effect on the demand for fixed
income holding cash money showed positive
and significant impact. This means that the
increase in fixed income will cause a rise in
demand for holding cash money. Conversely,
a decrease in fixed income will decrease the
demand for holding cash money. This shows
that the demand for money for the public is a
derived demand, good money as a store of
value, standard of value, as well as a medium
of exchange that is by Keynes macro regarded
as the transaction motive.
These results are consistent with the
initial hypothesis which states that the direct
effect of fixed income is positively and
significantly to the demand for holding cash
money. In addition, these results are also
consistent with the theory Gupta (1970),
Ragot (2010) and Tin (2010) which states that
the fixed income and significantly positively
related directly to the demand for holding
cash money. This reflects the more income a
person would cause the demand for cash
increased as well.
As for the indirect effect on the demand
for fixed income holding cash money through
financial investment showed positive and
significant impact overall. This means that the
larger the fixed income will result in an
increase of the financial investment.
Furthermore, with increasing financial
investment automatically resulted in increased
demand
for
holding
cash
money.
These results are consistent with the initial
hypothesis which states that the fixed income
indirectly affect positively the demand for
holding cash money through financial
investment. These results are also consistent
with the theory of Tobin (1956), Gupta
(1970), Ragot (2010), Tin (2010) which states
that the higher a person's income will increase
the propensity to save, holding money and
then go down. In the case of fixed income
indirect negative effect on the demand for
money when analyzed influence through
savings / financial investment.
In addition, the indirect effect on the
demand for fixed income holding cash money
through the consumption of durable goods
showed no significant effect on the whole.
This means that the size of the fixed income
would not affect the consumption of durable
goods. Furthermore, a lack of correlation
between fixed income and durable goods
consumption caused demand figures for
holding cash money also unchanged.
These results are not in accordance with the
initial hypothesis which states that the fixed
income indirectly affect positively the
demand for holding cash money through the
consumption of durable goods. This result is
6
Australian Journal of Basic and Applied Sciences, X(X) Month 2015, Pages: x-x
AUSTRALIAN JOURNAL OF BASIC AND APPLIED
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ISSN:1991-8178
EISSN: 2309-8414
Journal home page: www.ajbasweb.com
also not in line with the theory of Tobin
(1956), Gupta (1970), Ragot (2010) and Tin
(2010) which states that the positive
relationship between income indirectly fixed
by the demand for money when analyzed
influence through consumption can then be
inferred. A person with high income will of
course have the desire to consume is also
high, holding money increases.
Furthermore, the indirect effect on the
demand for fixed income holding cash money
through
financial
investment
and
consumption of durable goods showed no
significant effect on the whole. This means
that the size of the fixed income would not be
affected by changes in financial investment
financial investment which did not affect the
consumption of durable goods. This is then
coupled with a lack of influence on the
consumption of durable goods demand for
holding cash money.
These results are not in accordance with
the initial hypothesis which states that the
fixed income indirectly affect positively the
demand for holding cash money through
financial investment and consumption of
durable goods. This result is also not in line
with the theory of Tobin (1956), Gupta
(1970), Ragot (2010), and Tin (2010) states
that the magnitude of savings due to high
incomes will reduce consumption, holding
money down. This suggests that fixed income
is negatively related indirectly to the demand
for money when analyzed influence through
savings / financial investment and
consumption.
By comparing the effects of direct and
indirect demand for fixed income towards
holding cash money, found the dominance of
positive influence directly. Therefore, it can
be said total fixed income effect on the
demand for holding cash money shows a
trend towards a positive and significant
relationship.
The results of this study confirmed the
Keynesian theory that the motive of holding
money transactions and precaution is
influenced by a person's income. Based on
these descriptions, the theoretical implications
of these findings reinforce the theory of
Keynes money demand that states there are
three motives in holding the money that the
transaction
motive,
precaution
and
speculation. The second motive is the motive
of transactions and just in case influenced by
income.
 Analysis and Implications of Income
Variable Effect on Demand for holding
cash money Both Direct and Indirect
through
Financial
Investment
and
Consumption of Durable Goods
The direct effect of non-recurring
revenues to the demand for holding cash
money showed positive and significant
impact. This means that the increase in nonrecurring revenues will increase demand for
holding cash money. Conversely, a decrease
in non-recurring revenues will decrease the
demand for holding cash money. This shows
that the demand for money for the public is a
derived demand, good money as a store of
value, standard of value, as well as a medium
of exchange that is by Keynes macro regarded
as the transaction motive.
These results are consistent with the
initial hypothesis which states that income is
not fixed directly influence positively and
significantly to the demand for holding cash
money. Moreover, these results also in
conformity with the theory of Gupta (1970),
Ragot (2010) and Tin (2010) which states that
non-recurring revenues and significantly
positively related directly to the demand for
holding cash money. This reflects the more
income a person would cause the demand for
cash increased as well.
As for the indirect effect of income is not
fixed to the demand for holding cash money
through financial investment showed positive
and significant impact overall. This means
7
Australian Journal of Basic and Applied Sciences, X(X) Month 2015, Pages: x-x
AUSTRALIAN JOURNAL OF BASIC AND APPLIED
SCIENCES
ISSN:1991-8178
EISSN: 2309-8414
Journal home page: www.ajbasweb.com
that the greater the non-recurring revenues
will affect the larger financial investment.
Furthermore, the increase in financial
investment is automatically resulted in
increased demand for holding cash money.
Someone who has a non-recurring revenues
tend to increase financial investmentnya
either in the form of savings, deposit or
insurance in order to meet keperluaannya not
only in the present but also the future. With
many financial investment, people will feel
wealthy because of the money in the financial
investment that will lead to money illusion,
request money (holding cash money)
increases.
These results are consistent with the
initial hypothesis which states that nonrecurring revenues indirectly affect positively
on the demand for holding cash money
through financial investment. These results
are also consistent with the theory of Tobin
(1956), Gupta (1970), Ragot (2010), Tin
(2010) which states that the higher a person's
income will increase the propensity to save,
holding money and then go down. In this case
the income is not fixed indirect negative
effect on the demand for money when
analyzed influence through savings / financial
investment.
In addition, the indirect effect of nonrecurring revenues to the demand for holding
cash money through the consumption of
durable goods showed no significant effect on
the whole. This means that the size of nonrecurring revenues will not affect the
consumption of durable goods. Furthermore,
the absence of no fixed relationship between
income and consumption of durable goods
figure caused demand for holding cash money
also unchanged.
These results are not in accordance with
the initial hypothesis which states that nonrecurring revenues indirectly affect positively
on the demand for holding cash money
through the consumption of durable goods.
This result is also not in line with the theory
of Tobin (1956), Gupta (1970), Ragot (2010)
and Tin (2010) which states that the positive
relationship indirectly between income is not
fixed to the demand for money when analyzed
influence through consumption can then be
concluded , A person with high income will
of course have the desire to consume is also
high, holding money increases.
Furthermore, the indirect effect of income
is not fixed to the demand for holding cash
money through financial investment and
consumption of durable goods showed no
significant effect on the whole. This means
that the size of non-recurring revenues will
not be affected by changes in financial
investment financial investment which did not
affect the consumption of durable goods. This
is then coupled with a lack of influence on the
consumption of durable goods demand for
holding cash money.
These results are not in accordance with
the initial hypothesis which states that the
income is not fixed positive and significant
impact indirectly on the demand for holding
cash money through financial investment and
consumption of durable goods. This result is
also not in line with the theory of Tobin
(1956), Gupta (1970), Ragot (2010), and Tin
(2010) states that the magnitude of savings
due to high fixed income as well as nonpermanent will reduce consumption, holding
money down. This indicates that the positive
non-recurring revenues related indirectly to
the demand for money when analyzed
influence through savings / financial
investment and consumption.
By comparing the effects of direct and
indirect income is not fixed to the demand for
holding cash money, found the dominance of
positive influence directly. Therefore, it can
be said the total effect of non-recurring
revenues to the demand for holding cash
money shows a trend towards a positive and
significant relationship. Based on these
descriptions, the theoretical implications of
these findings reinforce the theory of Keynes
8
Australian Journal of Basic and Applied Sciences, X(X) Month 2015, Pages: x-x
AUSTRALIAN JOURNAL OF BASIC AND APPLIED
SCIENCES
ISSN:1991-8178
EISSN: 2309-8414
Journal home page: www.ajbasweb.com
money demand that states there are three
motives in holding the money that the
transaction
motive,
precaution
and
speculation. The second motive is the motive
of transactions and just in case the income is
affected by the legacy which is a non-working
income.
 Analysis and Implications Effect on the
Legacy Demand for holding cash money
Both Direct and Indirect through Financial
Investment and Consumption of Durable
Goods
The direct effect of the legacy variable
demand for holding cash money showed no
significant effect. This means that the
inherited changes will not affect changes in
demand for holding cash money. This shows
that the demand for money for the public is a
derived demand, good money as a store of
value, standard of value, as well as a medium
of exchange that is by Keynes at the macro
level is not said as a motive for the
transaction.
These results are not in accordance with
the initial hypothesis which states that legacy
direct influence positively and significantly to
the demand for holding cash money.
Moreover, these results also incompatible
with the theory Gupta (1970), Ragot (2010)
and Tin (2010) which states that the positive
and significant legacy relates directly to the
demand for holding cash money. This reflects
the more income a person would cause the
demand for cash increased as well.
As for the indirect influence of the legacy of
the demand for holding cash money through
financial investment showed positive and
significant impact overall. This means that
more and more legacy it will affect the larger
financial investment.
Tabel 2. Coefficient Estimation Results
Direct and Indirect Effects of Exogenous
Variables Nor Good Against Endogenous
Variable Demand for holding cash money
(Y3)
N Directions
o Influence
Between
Variables
/
Hypotheses
Research
1
2
Hypothesis 1
a) x1 y3
Through y1
Through i y2
Through y1 &
y2
b) x1 y1
c) x1 y2
Through y1
Hypothesis 2
a) x2 y3
Through i y1
Through y2
Through y1 &
y2
b) x2 y1
c) x2 y2
Through y1
Figures Coefficient Estimation for
Variable Effect
Direct
Indirect
Total
Effect
Effect
Effect
0,317*
0.467*
0,117245*
0,02832*
0,0041186
0,655*
0,59*
0,655*
0,676*
0,085805
0,102*
0,140*
0,032399*
0,003792
0,001138128
0,181*
0,079
0,181*
0,103
0,023711
3
Hypothesis 3
a) x3 y3
0,011
Through y1
Through y2
Through y1 &
y2
b) x3 y1
0,126*
c) x3 y2
0,097*
Through y1
*) Significant on α = 5 %
0,039
0,022554*
0,004656*
0,0007922
0,126*
0,114*
0,016506
6.CONCLUSION
The conclusion of the research as follows:
1. Effect of variable demand for fixed income
towards holding cash money showed a
positive and significant influence either
directly or indirectly through financial
investment only. The results of this study
confirmed the Keynesian theory that the
9
Australian Journal of Basic and Applied Sciences, X(X) Month 2015, Pages: x-x
AUSTRALIAN JOURNAL OF BASIC AND APPLIED
SCIENCES
ISSN:1991-8178
EISSN: 2309-8414
Journal home page: www.ajbasweb.com
motive of holding money transactions and
precaution is influenced by a person's income.
Based on these descriptions, the theoretical
implications of these findings reinforce the
theory of Keynes money demand that states
there are three motives in holding the money
that the transaction motive, precaution and
speculation. The second motive is the motive
of transactions and just in case influenced by
income.
2. Effect of variable income is not fixed to the
demand for holding cash money showed a
positive and significant influence either
directly or indirectly through financial
investment only. This shows that the demand
for money for the public is a derived demand,
good money as a store of value, standard of
value, as well as a medium of exchange that is
by Keynes macro regarded as the transaction
motive.
3. Effect directly to the legacy variable
demand for holding cash money showed no
significant effect, however indirectly positive
and significant influence of each through
financial investment and consumption of
durable goods. The results of this study
indicate that the magnitude of savings due to
higher revenues in this legacy (non-working
income will reduce consumption, holding
money down.
7. ACKNOWLEDGEMENTS
Thanks addressed to the promoter team
Prof. Dr. I Made Benyamin, M.Ec; Dr Sanusi
Fattah, M.Si and Dr. Paulus Uppun, MA,
lecturer of Economic Department, Economic
and Business Faculty, Hasanuddin University,
who have guided the authors in completing
this article.
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