Bidirectional relationships between inflation and key monetary indicators in Indonesia: Exploring short- and long-run dynamics

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Inflation is influenced by long-term exchange rate dynamics, while money supply and interest rates play minimal roles in both timeframes.
Key findings revealed that the exchange rate negatively affects inflation, and interest rates have a significant long-term connection.
Quantitative methods like VAR/VECM were employed to assess relationships between monetary indicators and inflation from 2016 to 2024.
Long-term stabilization of the exchange rate is crucial for effective inflation control in Indonesia, emphasizing policy importance.

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Quantitative analysis shows exchange rate significantly influences inflation in the long term, indicating a need for stabilization strategies.

Amalia et al. (2025) studied this question.

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Quantitative analysis shows exchange rate significantly influences inflation in the long term, indicating a need for stabilization strategies.