The Effect of Interest Rates, Inflation, Money Supply on Indonesian Economic Growth in The Digitalization Era

Abstract

This study aims to determinethe influence of interest rates, inflation, money supply on the growth of the Indonesian economy in the digital era. The variables in this study are interest rates, money supply, inflation and GDP. The analysis method used is Vector Auto Regression with the Impulse Response Function (IRF) test, Forecast Error Variance Decomposition (FEVD), stationarity test, cointegration test, lag structure stability test, and optimal lag length test. The results of the Vector Autoregression study using the lag 2 basis show that there is a contribution from each variable to the variable itself and other variables. The results of the Vector Autoregression analysis also show that past variables (t-1) contribute to the current variable both to the variable itself and other variables. From the results of the analysis, there is a reciprocal relationship between one variable and another. Response Function analysis shows the response of other variables to changes in one variable in the short, medium and long term, and it is known that the stability of the response of all variables is formed in the short, medium and long term. Variance AnalysisDecomposition shows the existence of variables that have the largest contribution to the variable itself in the short, medium and long term such as JUB and GDP. While other variables that have the greatest influence on the variable itself and are supported by other variables in the short, medium and long term are Interest Rates and Inflation which are most influenced by GDP.