KEMAMPUAN INFLASI PADAMODEL PURCHASING POWER PARITY DALAM MENJELASKAN NILAI TUKAR RUPIAH TERHADAP DOLLAR AMERIKA SERIKAT

Abstract

This research will analyze the relationship between inflation variable with exchange value
of Rupiah toward American Dollar. The model used is Purchasing Power Parity (PPP) model by
using Error Correction Model (ECM) analysis instrument. The employment of PPP model is
based on the empirical evidence which shows the ability of PPP model in predicting and
explaining the behaviour of the exchange value. While the reason of using ECM is that it is able to
explain the long term and short term behaviour of the exchange value.
The result of the result shows that in the short term period of time the inflation variable
does not significantly influence the fluctuation of the Rupiah’s exchange value toward the
American Dollar and the amount of money flowing. On the other hand, national income variable
and interest variable significantly influence the exchange value of Rupiah toward American
Dollar. The main emphasis of the research is that positive direction coefficient between inflation
and exchange value in the short term. The estimation result of the ECM shows that error
correction term (ECT) value equal zero. Therefore, it is concluded that the model used is valid.
Key Words : Purchasing Power Parity, Inflasi , Error Correction Models , Kurs