The Role Of Exchange Rate and Monetary Growth to Inflation in Indonesia
DITA KARISMA (Pembimbing: Endang Sri Parapti Soemiantoro, Dra., M.A.), Endang Sri Parapti Soemiantoro, Dra., M.A.
Inflation has been an ongoing issue reflecting the characteristic of the economy of Indonesia. In 1965, Indonesia suffered hyperinflation where the rate of inflation increased skyrocketed-high to level of 650%. In late 1990's, Indonesia faced monetary crisis where the inflation rate extremely reached the peak of 77,5% in mid 1998. Such situation was caused by the plummeted depreciation of rupiah and the enormously gigantic supply of money prior and during the crisis; rupiah even reached Rp16.000 per US dollar at the time. Based on those foregoing observations, this study focuses to delve a little deeper into the role of exchange rate movement and monetary growth as variables affecting the rate of inflation. The analysis method used to estimate the model is autoregressive distributed-lag (ARDL) method. The results confirm that exchange rate movement and monetary growth are significantly affect inflation; also confirm that there is long-run relationship between the variables.
Kata Kunci : exchange rate, monetary growth, inflation, ARDL method
