Error correction models (Case of data inflation in Indonesia)

Inflation is an important economic indicator. Always strive for a low and stable growth rate. High and unstable inflation is a reflection of the tendency to increase in prices for goods and services in general and continuously so that it can weaken the purchasing power of the people which will lead to a decrease in national income. Therefore, it is hoped that there will be a control over the inflation rate, which has recently shown a fluctuating graph. This study discusses the effect of changes in the rupiah exchange rate against the US dollar and changes in interest rates on changes in inflation in Indonesia which aims to model inflation in Indonesia using an error correction model. The results of this study indicate that changes in interest rates have a significant effect on changes in inflation, while changes in the rupiah exchange rate against the US dollar have no significant effect on changes in inflation.