The Responsiveness of the Velocity of Money to the Growth in E-Money Usage in ASEAN Countries: A Comparative Study of Indonesia, Malaysia, and Singapore

Abstract

This study examines the impact of electronic money usage, real Gross Domestic Product growth, policy interest rates, exchange rates, and the interaction of payment digitalization on the velocity of money in Indonesia, Malaysia, and Singapore. Using quarterly panel data from 2015 to 2025 and a Fixed Effects estimation, the model yields an within R-squared value of 52.11 percent, indicating that variations in the velocity of money can be explained by the variables under study. The estimation results show that e-money has a significant negative effect on the velocity of money, while real GDP growth and interest rates have significant positive effects. The exchange rate and the interaction term between e-money and economic growth do not show significant effects. These findings confirm that the increase in digital transactions has not fully accelerated the circulation of money, as a portion of e-money balances is still held as a precautionary balance. This study provides cross-country empirical evidence on the dynamics of payment digitalization and its implications for the effectiveness of monetary policy in the Association of Southeast Asian Nations.