Increase in Inflation Due to the Effect of Interest Rates in Indonesia

English

Abstract

Inflation in Indonesia from 2000-2008 was relatively unstable, with inflation instability in Indonesia. The goal of this study is to examine a number of variables that affect monetary inflation. To determine how monetary factors influence inflation in Indonesia, we use multiple linear regression model estimates using time series data, tests of conventional assumptions, and statistical tests. We discover that interest rates play a significant role in determining inflation; rising interest rates will result in rising inflation. The key factor contributing to rising inflation is the interest rate, hence the monetary authority must work to keep interest rates stable to prevent inflation.