Cointegration Analysis of Tourism Sector, Inflation, Interest Rate and Economic Growth in a Special Autonomy Region of Aceh Province, Indonesia

Abstract

This study is aimed at examining the cointegration relationship of tourism spending, inflation, interest rate, and economic growth. In addition, the correction measure is conducted to measure the tourism spending, inflation, interest rate, and economic growth trend are sustainable in Special Autonomy Province of Aceh, Indonesia between 1990 - 2019. Data from Indonesian Statistics Agency and Central Bank of Indonesia was used in this study. Johansen integration test figures out long run equilibrium of the analysed variables. Augmented Dickey Fuller test figures out that all variables are stationary at first difference. The result provides the evidence that there is one cointegrating relationship maintained. The result shows the long-term relationship of economic growth, tourism spending, inflation, and interest rate, where the null hypothesis is rejected with a statistical trace, and one vector equation co-integrates with the Max-Eigen statistical. This study recommends that policymakers should maintain low rate of inflation and constant level of interest rate.