Digital Payments, Money Demand, and SDGs in Indonesia

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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