Measuring Persistency of Inflation in East Java: A Comparation Study of 8 Cities in East Java

Abstract

Inflation is a variable that plays a vital role in the economy, including the economy of East Java. Each of these inflationary move-ments will cause several changes in fundamental economic variables, such as economic growth, unemployment, poverty, and so on. Therefore, this study aims to measure the persistence of inflation, which is defined as the speed of the inflation rate to return to its equilibrium level after a shock. This study will also analyze the causes of persistence in 8 cities in East Java. The univariate AR model is used to measure the persistence of inflation. The result obtained is that the degree of persistence of inflation in East Java is still quite high so that it needs attention from regulators. The average time it takes for inflation to return to equilibrium is about 4 months. Besides, inflation persistence is caused by high or future inflation expectations. it is necessary to optimize the role of the TPID in controlling price stability.