The Relationship between Macroeconomic Variable in Indonesia: Study of Economic Growth, Export, Import, Labor and Inflation

Abstract

The objective of this study is to assess the potential for mutual relationships and co-integration among variables such as economic growth, exports, imports, labor, and inflation in Indonesia, using secondary time series data covering the period from 1985 to 2022. The approach applied in this research involves the use of Vector Autoregression (VAR), encompassing Granger Causality and Johansen Co-Integration Test. Subsequently, Vector Error Correction Model (VECM) estimation and forecast analysis are conducted using Impulse Response Function, Variance Error Decomposition, and Forecasting. The results of the Granger Causality test indicate that there is only a unidirectional relationship between economic growth to imports, while there is no significant unidirectional relationship from other variables. The results of the Johansen Co-Integration test suggest that these variables have long-term relationships or are co-integrated. Based on the forecasting results, the research can be applied over the period from 1985 to 2037.