Published date:Jul 03 2019

Journal Title: KnE Social Sciences

Issue title: UNNES International Conference on Research Innovation and Commercialization 2018

Pages:627–637

DOI: 10.18502/kss.v3i18.4753

Karsinah .iinkarsinah@mail.unnes.ac.idUniversitas Negeri Semarang

Sucihatiningsih Dian Wisika PrajantiUniversitas Negeri Semarang

Widiyanto .Universitas Negeri Semarang

Nor Malisa Universitas Negeri Semarang

The aims of this research are to identify and analyze the exchange rate pass through towards domestic price in Indonesia. The aforementioned objective is reflected through the short-term and long-term influence variable, inflation fluctuation response due to other macroeconomic shock variable, which then reveals the characteristics of pass-through degree in Indonesia. The data used on this research was the quarter time series data from 1997 Q3 until 2017Q4. The variable used in this research were Consumer Price Index, Rupiah exchange value per Dollar, Import Price Index and SBI Interest Rate. The resource of the data variable were from Bank Indonesia and International Monetary Fund (IMF). The method being employed was Vector Error Correction Model (VECM). The result of the research shows that in the long-term and short-term period, all variable influences inflation by a different lag. Moreover, the impulse response function assessment reveals that shock variable of import price index receives a positive response by consumer price index. The result of variance decomposition assessment also concludes that the import price index has the biggest contribution.

Keywords: Inflation, Exchange Value, Shock, VECM

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