Financial liberalisation, through increasing investment as well as the average productivity of capital, should stimulate economic growth, or so the theory goes. Bank lending unfortunately suffers adverse selection and moral hazard effects, to which the establishment and expansion of stock...

This paper adopts the Johansen approach to cointegration to estimate a narrow money-demand function for Indonesia with annual data for the period 1970–2007. Empirical results suggest that there exists a cointegral relationship between real narrow balances, real permanent income and the deposit...