Analysis of the Effect of Gold Prices, Rupiah Exchange Rates and Interest Rates on West Java Inflation Persistence Degrees

Abstract

This study aims to analyze the level of inflation persistence in West Java Province and the contribution of a number of commodities to the formation of inflation persistence. The data used to estimate the degree of persistence is data from 2008 – 2020. This study uses a univariant model, the autoregressive time series model to estimate the degree of persistence of inflation. Meanwhile, to estimate the long-term and short-term effects using the Eangle Granger Error Correction Model (ECM). The results of the tests carried out show that West Java has a low degree of inflation persistence, so that the inflation rate will not take a long time to return to normal levels. Commodity groups with high inflation persistence are recreation and sports, while the lowest are household, personal care and other services. Which with this degree of persistence of inflation makes the commodity group to be able to return to its normal condition after a shock occurs, it takes approximately 0 – 0.3 months. As for commodities with high persistence, it takes approximately 1 month. For the long-term and short-term effects, the results show that the price of gold, the rupiah exchange rate, and interest rates have a positive and significant effect.