ANALISIS PENGARUH DEFISIT ANGGARAN, UANG BEREDAR DAN PDB TERHADAP TINGKAT INFLASI DI INDONESIA PERIODE 2001.1 ─ 2013.4

Abstract

Inflation rate is one of the main indicators of a country’s macroeconomic performance. Therefore, inflation rate must be managed at low level and in a stable condition. High inflation can stimulate the deterioration of income distribution, increasing poverty rate, reducing domestic saving and generating current account deficit. The rate of inflation is affected by the government fiscal and monetary policy, and other relevant economic factors unrelated with both government policies. This research aims to analyze the effect of budget deficit, money supply and gross domestic product (GDP) upon inflation rate in Indonesia from 2001 to 2013. This research uses Vector Error Correction Model (VECM) approach. Meanwhile, Impulse Response Function (IRF) is used to trace the response of a variable upon the shock within the estimation model, while Forecast Error Variance Decomposition (FEVD) is used to disclose the relation path between variables within a system. The results of estimation show that in the long-run, budget deficit and GDP have positive and significance influence upon inflation rate, however money supply has negative and significant to inflation rate. Furthermore, in the short-run money supply and GDP positively and significantly influence the inflation rate, while budget deficit has no significant effect upon inflation rate.