ANALYZING FACTORS AFFECTING INDONESIAN FOOD PRICE INFLATION
DOI:
https://doi.org/10.14203/JEP.28.1.2020.65-76Keywords:
Inflation, Food, EnergyAbstract
In the last decade, Indonesia’s inflation is predominantly influenced by volatile food, consists mostly of food commodities, and administered price; while the core inflation has been relatively stable. The food contribution in the living cost survey has a substantial contribution to measuring inflation. This paper aims to analyze the empirical condition of food prices movements and other commodities prices changes, particularly on energy commodities (housing and transportation). Using a monthly consumer price index from 2004 to 2017 with 168 total series observations, we estimated a vector error-correction model (VECM). The assumption that the price variable in the estimation process has perfect information shows that the major drivers of Indonesian food price inflation are the food commodities itself by the demand-supply interaction and the shock of transportation prices rather than housing prices. Therefore, the authorities of inflation control are likely to focus on maintaining the supply and demand as well as keeping the cost structure of food stable to control food price inflation.Downloads
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