Analysis of the Influence of Real Interest Rate, Exchange Rate and Economic Growth on Inflation in Indonesia: Error Correction Model Approach

Abstract

This study aims to analyze and determine the effect of real interest rates, exchange rates and economic growth on inflation in Indonesia. This type of research is descriptive quantitative. The data used in this study is secondary data from 2005 to 2019 in Indonesia. The independent variables in this study are Real Interest Rates, Exchange Rates and Economic Growth, while the dependent variable is inflation. The data analysis method used is the error correction model (ECM). The results showed that based on the results of short-term regression and long-term regression of real interest rates, negative and significant results were obtained on the inflation variable, the exchange rate had a positive and significant effect on the inflation variable and economic growth had a positive and significant effect on the inflation variable.