INFLATION PERSISTENCE IN NORTH SUMATERA PROVINCE

Wily Julitawaty

Abstract


Abstract
The purpose of this study was to determine the persistence of inflation in 
major North Sumatera Province in 2007 until 2012 and value contributed 
Output Growth (GDP) of North Sumatera, Exchange Rate, Interest Rate 
and Error Correction Term about Inflation in North Sumatera. Data is used 
secondary data from general Consumer Price Index (CPI) from North 
Sumatera Province include Medan, Pematangsiantar, Sibolga and 
Padangsidempuan monthly of January 2007 until December 2012. And 
secondary data Consumer Price Index (CPI) of North Sumatera Province, 
Gross Domestic Product of Province Sumatera Utara, Exchange Rate and 
Interest Rate of BI Rate yearly of 1999 until 2012. Model is used model 
econometric with Autoregressive method and Error Correction Model. 
Result of this research with estimation of VAR model concludes that 
degree of persistence of 4 town from North Sumatera Province is low. 
Result of estimation of model ECM concludes that Interest Rate 
significantly affect to inflation rate, while Gross Domestic Product of North 
Sumatera Province and Exchange Rate not significantly affect to inflation 
rate. While ECT becomes significant correction to variable inflation rate. 
Where the form of error correction in the ECM suggests a long‐term 
relationship between the variables inflation, GDP variable, the variable 
exchange rate and variable interest rate is comparable.

Keywords: Inflation Persistence, Inflation, IHK, Error Correction Model
(ECM)


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