Inflation expectation and consumption expenditure in Indonesia

Abstract

Consumption is a sector that has so much influence on Indonesia’s national income, even its contribution can reach 50% more. However, unfortunately all this time the consumption needs of the Indonesian people tend to be more used by foreigners. Useful research needs to be done so that the government can control people’s consumption for the benefit of the economy. One variable that is estimated to have an influence on consumption expenditure is inflation expectations. However, there are still many pros and cons of the influence of the inflation expectation variable. So that the influence of inflation expectations on consumption expenditure is still quite interesting to study. The data used in this study is data from 2003 to 2018. Chow test results show that there was a structural break in the 2008 second quarter period so that the data was broken down into 2003Q1-2008Q1 and 2008Q32018Q2. The results showed that inflation expectations did not affect consumption expenditure in the two periods. Even using the data as a whole, the same thing happened. So, it can be concluded that inflation expectations cannot be used as a tool to control public consumption.