Journal of Islamic Financial Studies ISSN (2469-259X) J. Islam. Fin. Stud. 3, No.2 (Dec-2017) http://journals.uob.edu.bh The Infuence of Conventional and Islamic Monetary Instruments on Gross Domestic Product: An Empirical Investigation on Indonesia Try Roedyhantoro Muhammad 1 , Eko Fajar Cahyono 2 and Tika Widiastuti 3 1,2.3 Faculty of Economics and Bussiness – Airlangga University Received 05 Sep. 2017, Accepted 10 Nov. 2017, Published 01 Dec. 2017 Abstract:. This study aims to determine that Islamic monetary instruments and conventional monetary instruments both have an effect on the Gross Domestic Product in Indonesia. Indonesia nowadays uses a dual banking system so that in regulating its monetary policy, Indonesia uses a dual system monetary (Islamic monetary policy and conventional one) as well. This research uses the quantitative approach with Vector Auto Regression (VAR) method. This study seeks to fll the gap between theory and empirical evidence of the linkage between monetary instruments and gross domestic products. Such linkages, especially on Islamic monetary instruments that encourage the growth of the real economy should have more infuence on the development of the real economy than conventional economic instrumentsThis research is held from January 2012 until December 2016 in Indonesia. There are 5 variables in this research, they are “Sertifkat Bank Indonesia” (SBI) and Reverse Repo “Surat Utang Negara” (SUN) to represent conventional monetary instrument, and the representative of Islamic monetary instrument is “Surat Bank Indonesia Syariah” (SBIS) and Reverse Repo “Surat Berharga Syariah Negara” (SBSN) and the last variable is Gross Domestic Product (GDP). The results of the study suggest that SBI has a signifcant positive effect on GDP in Indonesia. While Reverse Repo SUN, SBIS, and Reverse Repo SBSN have no signifcant effect on GDP. The results of this study can be used by the central bank to determine the portion of monetary policy in both Islamic and conventional banks to achieve the optimal goal of monetary policy Keywords: SBI, SBIS, Reverse Repo SUN, Reverse Repo SBSN, Monetary JEL Classifcation: E44 1. Introduction Real sector is a representation of the public welfare because it is an overview of the amount of production of goods and services within a region. When the level of a country’s productivity increased, it will affect the increase in Gross Domestic Product (GDP). This is in line with what Samuelson and Nordhaus (2005) have found that GDP is a gauge to assess the overall performance of the economy. E-mail: try.roedyhantoro-13@feb.unair.ac.idm Email, ekofajarc@feb.unair.ac.id, tika.widiastuti@feb.unair.ac.id http: //dx.doi.org/10.12785/jifs/030205