Title:
DYNAMIC ANALYSIS OF ECONOMIC GROWTH, MONEY SUPPLY, INFLATION AND EXCHANGE RATES: USING OLS AND VAR METHODS

Authors:
HASRIL HASAN, Indonesia

Abstract:

This study aims to analyze the influence of Money Supply, Inflation and Exchange Rate on economic growth in the quarterly period, using Ordinary Least Square and Vector Autoregressive analysis methods. The results of multiple regression tests of the Ordinary Least Square method indicate an invalid model due to the unbreakable assumptions of multicolineritas.  Vector Autoregressive Stationary testing shows that all three DLNGDP, DLNCPI and DLNER variables are stationer at the first difference level. Vector Autoregressive estimates show that the impact of CPI and ER in short-term (Lag_1) is significantly positive on changes in economic growth (DLNGDP). But in the longer term (Lag_2) weakened because the influence is significantly negative. The influence of DLNGDP inaction is both negative, both DLNGDP_1, and DLNGDP_2.Gives an indication that economic growth is more determined by economic growth in the past. The Impulse Respond Function shows movement that is increasingly away from the equilibrium point, so the shock leaves a permanent influence on the variable. Variance Decomp [osition] test results show all three variables, DLNGDP, DLNCPI and DLNER are endogenous variables. Forecasting of model obtained is quite accurate because errors are getting closer to zero.