THE INFLUENCE OF MACROECONOMICS VARIABLES ON THE INFLATION LEVEL IN INDONESIA: ERROR CORRECTION MECHANISM APPROACH

Abstract

Fluctuations in the inflation rate in Indonesia are something that the government must continue to pay attention to because high inflation rates can reduce people's purchasing power and increase the cost of living. This research aims to see the influence of macroeconomic variables such as the exchange rate, money supply, interest rates, Gross Domestic Product (GDP), and the value of imports on inflation in Indonesia from 2003 to 2023. This research is quantitative research using time series data from 2003 to 2023. Data was analyzed by Error Correction Mechanism (ECM) and taken from Badan Pusat Statistik and Bank Indonesia and data processed by using the Eviews 10 application. The research results show that in the long term the reference interest rate has a significant positive influence on inflation in Indonesia. Meanwhile, in the short term, the benchmark interest rate and GDP have a significant positive influence on the inflation rate in Indonesia.