Impact of Inflation and Unemployment on North Sumatra's Economic Growth: A 20-Year Analysis

Abstract

This study aims to analyze the impact of inflation and unemployment on economic growth in North Sumatra over the past 20 years. Using data from 2004 to 2023, this research employs a quantitative approach to examine the relationships between inflation, unemployment, and economic growth through regression analysis. The results indicate that inflation has a negative impact on economic growth, with a regression coefficient of -0.011, suggesting that each unit increase in inflation reduces economic growth by 1.1%. This effect is attributed to Bank Indonesia's policy of maintaining rupiah stability through the implementation of the Inflation Targeting Framework (ITF) and the flexible ITF. Additionally, the study finds that unemployment negatively impacts economic growth, with a regression coefficient of -0.001, meaning that each unit increase in unemployment decreases economic growth by 0.1%. High unemployment rates hinder the contribution of productive labor to production activities, ultimately slowing economic growth in North Sumatra. The study suggests that the government and Bank Indonesia should continue efforts to maintain inflation stability and implement effective policies to reduce unemployment. Proposed measures include enhancing the quality of education and skills training, creating new job opportunities, and improving the investment climate. Consequently, it is expected that economic growth in North Sumatra will be more stable and sustainable.