Covid 19, Inflation Threat, and Domestic Consumption in Indonesia

Abstract

This study examines inflation, consumption, and economic growth before COVID-19 to see a causal relationship between inflation, consumption, and economic growth in Indonesia so as to provide an overview of the economic impact of post-covid-19 inflation. This research examines data from 2000 until 2020 to be able to produce "autoregressive vectors" that may be used to evaluate the causal link between variables. Based on secondary data from the World Bank, the following multivariate regression model was used to investigate the causal link between Inflation, Gross Domestic Product, and Consumption expenditure in Indonesia. We found that inflation has a significant impact on economic growth and the real sector in Indonesia. Indonesia with a large population contributes greatly to economic growth. The results of this study are quite surprising where inflation actually encourages economic growth and consumption in Indonesia. However, the results of this study need to be confirmed regarding people's purchasing power during the research period. From the period 2000 to 2020, Indonesia has escaped the 1997 Asian crisis so Indonesia's economy is quite stable during the study period. And in 2020 when covid 19 began to spread in Indonesia, online-based purchases supported Indonesian consumption, so inflation during this research period actually boosted economic growth and consumption in Indonesia.