THE EFFECT OF MONETARY POLICY ON THE STABILITY OF PRICE IN INDONESIA

Eka Sukarti, Lilis Siti Badriah, Abdul Aziz Ahmad

Abstract


Inflation is one indicator of economic stability which has always been an important concern for all countries, especially Indonesia. High and unstable inflation is a reflection of the tendency to increase the price level of goods and services in general and continuously over a certain period of time. Thus, the need for monetary policy to regulate the inflation rate to stabilize the prices of goods and services in the market. This study aims to analyze the effect of the money supply, the rupiah exchange rate, and the interest rate on inflation in Indonesia. The data used are times series in 2016.1 until 2018.12. Secondary sources from the Central Statistics Agency and Bank Indonesia. The method used in this study is multiple linear regression. The analytical tool used is multiple linear regression. The results of this study indicate that the variable that the variable money supply and interest rates has a positive and significant effect on inflation in Indonesia. In addition, the exchange rate variable has a positive and insignificant effect on inflation in Indonesia in 2016.1 up to 2018.12. With this, further analysis of the factors that affect the inflation rate in Indonesia, the findings of this study can be a reference and consideration for the government to implement a policy instrument in controlling inflation.

 

Keywords: 1 Money Supply Amount · 2 Interest Rate · 3 Exchange Rate · 4 Inflation


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