The Effect of GDP and Exchange Rate on Inflation in Aceh Province

Tri Puspita Rahmawati1, Anita Sholih Harahap, Pangiutan Syafriansya Pasaribu

Abstract


This study aims to analyze the effect of Gross Regional Domestic Product (GRDP) and exchange rates on inflation in Aceh Province using the Vector Error Correction Model (VECM) approach. Secondary data was obtained from the Aceh Central Statistics Agency for the period 1988-2021. The results show that in the short term, GRDP has a positive but insignificant effect on inflation, while the exchange rate has a positive and significant effect. In the long term, GRDP and exchange rates both have a negative effect, but only the exchange rate is significant on inflation. Granger causality analysis shows no causal relationship between GRDP and exchange rates with inflation. The findings of this study can be the basis for consideration in formulating effective economic policies to manage inflation in Aceh Province

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DOI: https://doi.org/10.24114/qej.v9i2.67190

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