The Impact Of Exports, Imports, Real Interest Rates, And Inflation In Indonesia From 1991 To 2024 Using The VECM Model

Abstract

This study uses the Vector Error Correction Model (VECM) technique to determine the effects of imports, exports, real interest rates, and inflation in Indonesia from 1991 to 2024. The World Bank provided the annual data, which was empirically analyzed using a number of econometric stages. According to the stationarity test, all variables are not stationary at the level but become stationary following the first differentiation. The VAR model was declared stable with an optimum lag of 2. The Johansen cointegration test proves the existence of a long-term relationship between variables. VECM estimates reveal that exports and imports are significant factors affecting inflation in the short term, while real interest rates act as an important adjustment mechanism that guides variables toward long-term equilibrium. The Granger Causality Test found a two-way relationship between inflation and imports, indicating that both variables influence each other over time.