Resumen de The sources and dynamics of inflation in Indonesia: An ECM model estimation for 1952-2002
This paper uses annual data for the period 1952-2002 to investigate the inflationary process in Indonesia within the cointegration-and error-correction modeling framework. The empirical results suggest that the consumer price index (CPI), the stock of narrow (M1) or broad money (M2) and real permanent income form a (weakly) cointegral relationship for the complete sample period. This relationship remains broadly stable for several sub-samples, especially when the model is estimated with a narrow definition of money. The dynamic relationship between money, output, prices, and the exchange rate is investigated within a general-to-specific error-correction modeling framework. The presence of a significant error-correction term implies that given economic growth, there existed a long-run causal relationship between money supply growth and inflation.
