STRUCTURAL ANALYSIS OF MACROECONOMIC VARIABLES IN INDONESIA: A VAR APPROACH

Abstract

This study analyzes how the structural relationship between macroeconomic variables such as inflation, interest rates, exchange rates, investment, and exports on economic growth in Indonesia using the Vector Auto Regression (VAR) model approach. With quarterly time series data from the period 2011 to 2023 and data sourced from the Central Bureau of Statistics and Bank Indonesia, this study evaluates short and long term relationships using stationary tests, impulse response function (IRF) and variance decomposition (VDC). The results show that most variables have a significant contribution to economic growth. Interest rate and investment variables are the most dominant factors in the long run. The VAR approach also proves the stability in predicting the response of the economy to external shocks. This study highlights the importance of sustainable monetary and investment policies to support economic growth as well as the need for stability of other economic variables such as inflation and exchange rates. This study provides insight into the macroeconomic dynamics in Indonesia and serves as a reference for more effective policy making.