Inflation in Indonesia

This paper tries to explore the determinants of inflation in Indonesia in 1970 – 2010 and divide the period of analysis into several periods to capture specific characteristic of inflation determinants. Based on the average of inflation there are three identified periods which are 1970 – 1984, 1985 – 1999, and 2000 – 2005. In general determinant inflation in Indonesia are excess liquidity, exchange rate and oil price. Relevance to Development Studies Knowing the determinants of inflation are significantly important for policy makers as when the causes of inflation are correctly specified, the appropriate policy change can be easily analysed and effectively implemented.