The Effect of BI Rate and Exchange Rate on Inflation in Indonesia with the Money Supply as a Mediating Variable

Abstract

Inflation can be interpreted as a tendency to increase the prices of goods and services in general and continuously which can be influenced by several factors such as reference interest rates, exchange rates, the money supply and so on. This study intends to analyze about the influence of the BI rate and the exchange rate on inflation in Indonesia with the money supply as an intervening variable. The population in this study is Inflation, BI Rate, Rupiah / USD Exchange Rate, and Money Supply. The sample used is this data in the 2010-2019 period which was analyzed using WarpPLS and Sobel Test. The results show that the BI rate, exchange rate and the money supply have a significant effect on inflation and the money supply can mediate the effect of the BI rate and the exchange rate on inflation which has been proven by the sobel test. Keywords:InflationBI RateExchange RateMoneySupply

PHENOMENA OF ECONOMIC CONTRACTION IN PANDEMI TIME: Inflation, Reference Interest Rate, Rupiah Exchange Rate & Money

“…According to Boediono in Huruta & Sasongko (2020) Interest rates are the price that must be paid if there is an exchange between one Rupiah now and one Rupiah later (Oktavia & Wahyudi, 2020). An increase in unreasonable interest rates will make it difficult for the business world to pay interest expenses and liabilities, because high interest rates will add to the burden on the company so that it will directly reduce the company's profits (Bawono, et al, 2021).…”