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The Effect Labor Wage and Exchange Rate on Inflation

Sri, Isnowati and Fx, Sugiyanto and Akhmad Syakir, Kurnia and Endang, Tjahjaningsih The Effect Labor Wage and Exchange Rate on Inflation. Montenegrin Journal of Economics.

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Abstract

This study aims to analyze the effect of changes in exchange rates on inflation in Indonesia. It is discussed changes in the exchange rate will affect the use of production factors, especially labor production factors which in turn affect inflation. The research was conducted in Indonesia, with a time period of 2000.1-2020.1. The data used is secondary data published by Bank Indonesia. The data analysis method used is multiple regression analysis with the Error Correction Model (ECM) method. The results showed that Error Correction Term was significant, so it could be concluded that the model specification was correct. In the short term, foreign wages have a positive effect on the inflation , while in the long term, foreign wages have a negative effect on infation in Indonesia. Variable the level of domestic wages in the short term is not significant to inflation, while in the long term this variable has a negative and significant effect on inflation in Indonesia. The foreign price variable shows that the foreign price variable has an effect on n the short and long term. For the exchange rate variable, the results of the study show that the exchange rate has a positive effect in the short and long term on inflation. The long term effect is greater than the short term. This shows that the Exchange Rate Pass Through which works through the use of labor in Indonesia has a greater impact in the long term.

Item Type: Article
Subjects: H Social Sciences > H Social Sciences (General)
Faculty / Institution: Fakultas Ekonomika dan Bisnis
Depositing User: Fakultas Ekonomi
Date Deposited: 22 Jun 2023 03:04
Last Modified: 22 Jun 2023 03:19
URI: https://eprints.unisbank.ac.id/id/eprint/9621

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