How Do Global Energy and Food Prices and Exchange Rates Affect Inflation? An Application of a Nonlinear Autoregressive Distributed Lag Model for Indonesia

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DOI: https://doi.org/10.28924/2291-8639-24-2026-80
Published: Mar 19, 2026
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Arintoko Arintoko, Diah Setyorini Gunawan, Herman Sambodo, Rakhmat Priyono, How Do Global Energy and Food Prices and Exchange Rates Affect Inflation? An Application of a Nonlinear Autoregressive Distributed Lag Model for Indonesia, Int. J. Anal. Appl., 24 (2026), 80.

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Arintoko Arintoko, Diah Setyorini Gunawan, Herman Sambodo, Rakhmat Priyono

Abstract

This study aims to investigate the asymmetric effects of changes in international prices of energy and food and the monetary variables, including exchange rates and policy interest rates, on consumer price index (CPI) inflation in Indonesia. This study employs the Nonlinear Autoregressive Distributed Lag (NARDL) model for the period July 2005 to December 2023. The findings indicate that increases in global food prices led to a significant rise in the Consumer Price Index (CPI), indicating inflation. The study also provides empirical evidence of the asymmetric effect of changes in international food prices on the CPI. The exchange rate emerged as the variable with the most influence on inflation, with the depreciation and appreciation of the local currency. Lessons from these findings, in implementing monetary policy, authorities need to focus on inflation originating from supply shocks, which are influenced by changes in global energy and food prices and exchange rates.

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