Pengaruh Sektor Moneter Terhadap Inflasi Di Indonesia: Pendekatan Error Correction Model

Inflation rate has to be maintained at a low and stable level so that people’s purchasing power can be maintained as well. In Indonesia, money supply is always high and the exchange rate is depreciated, so suppress money circulation and limiting imports are necessary to get rupiah appreciated. This study aimed to estimate the effect of money supply, exchange rate, and interest rate on inflation in Indonesia from 1990-2019 using the Domowitz-Elbadawi Error Correction Model (ECM). The results of this study indicated that all independent variables were proven to statistically have a positive effect on inflation in the short term, while in the long term, money supply had a negative effect on inflation, while exchange rate and interest rate had a positive effect on inflation. The government is expected to maintain the supply of goods in the market so that they are always available and that there will be no shortage that causes price increases. That way, inflation in Indonesia can be more controlled