Impact And Influence Of Inflation, Economic Growth,And Inflation In Indonesia: VECM Analysis

English

Abstract

This study was conducted with the aim of describing, studying, and exploring the impact and influence of inflation, economic growth, and inflation in Indonesia. This study uses secondary data with a time span of 2001-2021 published in the World Bank. The used analytical method is quantitative with the VECM (Vector Error Correction Model) using the variables inflation, unemployment, and GDP as representatives of growth of economic. It can be seen that inflation has a positive correlation and relationship to unemployment and has a negative influence on economic growth. The rising trend of inflation will lead to an increasing in unemployment which will also cause a decrease in economic growth. On the other hand, economic growth in the previous period had a positive/beneficial influence on unemployment and had a negative/detrimental influence and effect on economic growth in the current period. These results identify how increased economic growth will result in lower inflation rate as well as reduce economic growth in the current period. This was due to an increase in the unemployment rate. In addition, causality or causal relationships only occur in the unemployment variable that affects inflation. While the causal relationship between other variables has no significant effect.