Monetary Policy Analysis on Economic Growth and Poverty Rate in North Sumatra Province

Abstract

This study was compiled to examine the reciprocal relationship between inflation, interest rates, money supply, economic growth, and poverty levels in North Sumatra Province during the period from 2009 to 2024. The data used in this study are secondary, collected from the Central Statistics Agency (BPS), Bank Indonesia, and several other relevant supporting sources. To overcome the interdependence between variables, the analysis was carried out using a simultaneous equation model through the Two Stage Least Squares (TSLS) approach. The results of the estimation show that in the first equation, inflation, interest rates, money supply, and poverty level together have a significant influence on the economic growth of North Sumatra Province, as seen from the Prob(F-statistic) value of 0.0451. Meanwhile, in the second equation, inflation, interest rates, and economic growth together also have a significant effect on the poverty rate, with a Prob(F-statistic) value of 0.0020. The determination coefficient (R²) obtained shows the ability of the variables in the model to explain the variation in economic growth of 47.58% and the variation in poverty rate of 74.79%. The findings in this study show that there is a close relationship between monetary variables and economic growth and poverty levels, so that they affect each other economic conditions at the regional level