Analysis of the Impact of Consumer Price Index and Gross Domestic Savings on Gross Domestic Product Using Vector Error Correction Model (VECM) Rizka Khairunnisa, Mujiati Dwi Kartikasari*
Department of Statistics, Universitas Islam Indonesia
Jalan Kaliurang Km 14.5 Sleman, Yogyakarta, 55584, Indonesia
*mujiatikartikasari[at]uii.ac.id
Abstract
Gross domestic product, or GDP, is the market value of all final goods and services produced in a country during a given period or year. Although many factors affect GDP, this research focuses on the Consumer Price Index (CPI) and Gross Domestic Savings (TDB) in Indonesia. The main objective of this study is to examine the causal relationship and the impact of CPI and TDB on GDP from 1968 to 2018. This study also focuses on the use of VECM, which is a restricted form of the Vector Autoregressive (VAR) model. This restriction is given as a result of data problems that are not stationary but have a long-term relationship (cointegration). Stationarity and cointegration tests are the first step in anticipating the existence of false regressions so that the data to be analyzed will not provide misleading information. Based on the results of the study, the data was found to be non-stationary, and then first-order differencing was performed on the data. After the data is stationary and it is found that there is cointegration, the assumptions of the VECM analysis are met. However, the VECM analysis found that there was no statistically significant long-term relationship between variables, only a short-term relationship between the CPI variable and GDP, and no short-term relationship from TDB to GDP. Meanwhile, based on the results of the paired causality test, it was found that CPI affects GDP but not vice versa, and it was also found that TDB does not affect GDP but vice versa. As for the results of the analysis of the Impulse Response Function (IRF) and Variance Decomposition (VD), the results show that the CPI tends to have a significant impact on GDP, while TDB does not have a significant effect on increasing the value of GDP.
Keywords: GDP, CPI, GDS, Causality, VAR, Vector Error Correction Model (VECM)
