Pengujian Model Purchasing Power Parity Dalam Menjelaskan Hubungan Inflasi dan Nilai Tukar Rupiah

3rd Economics & Business Research Festival. Proceeding Seminar &Call For Papers : Business Dynamics Toward Competitive Economic Region Of Asean (Salatiga : 2014), p. 797 - 813This research aimed to analyze the relation between inflation variable and the currency exchange rate from Rupiah to US Dollar. The research mode was Purchasing Power Parity (PPP) supported by Error Correction Model (ECM) as analysis tool. PPP model was used based on empirical evidence that showed the ability in predicting and explaining exchanging rate behaviour. ECM was used because of the ability to explain both short term and long term behaviours. The research result showed that inflation variable didn’t significantlly influence the fluctuation on currency exchange rate from Rupiah to US Dollar as well as the amount of the money circulation during the short term. However, national income variable and interest rate variable significantly influenced the fluctuation on currency exchange rate from Rupiah to US Dollar. The conclusion for both long term and short term analysis had no difference, in which inflation variable wasn’t able to explain Rupiah exchange rate behaviour. The underlying thing could be taken from the research was the positive coefficient between inflation and exchange rate in both short and long terms. The estimation results and the error correction models showed that the ECT (Error Correction Term) score was equal to zero, so it could be concluded that the model used in the research was vali