Unravelling Indonesia’s CPI Inflation Dynamics through ARIMA-Based Intervention Analysis

The COVID-19 pandemic has significantly influenced the Consumer Price Index (CPI) of Indonesia, resulting in substantial fluctuations in inflation. These variations, driven by both external and unpredictable factors, have profound effects on the broader economy and society. Methods: This study employs the Autoregressive Integrated Moving Average (ARIMA) model to forecast the general CPI inflation in Indonesia. To assess the impact of major events, such as the COVID-19 pandemic, intervention analysis is incorporated into the model. Results: The ARIMA model selected for forecasting the CPI inflation in Indonesia demonstrates strong predictive accuracy, with an AIC value of 250.44 and a MAPE of 11.05%. These results indicate that the model offers a high level of reliability for forecasting inflation. The model was further used to predict CPI inflation for the first four months of 2023 (January to April), providing valuable short-term forecast understanding. Concluding Remarks: The ARIMA model, enhanced with intervention analysis, provides a robust tool for forecasting CPI in Indonesia, highlighting its effectiveness for short-term inflation predictions. With a low AIC and an acceptable MAPE, the model offers actionable insights for policymakers and stakeholders, supporting informed decisions aimed at mitigating the adverse effects of inflation volatility in the post-pandemic economy.

Authors:
Rezzy Eko Caraka, Prana Ugiana Gio, Andrari Grahitandarui, Budi Nugroho, Nimas Ayu Untariyati, Rumanintya Lisaria Putri, Amos Lukas, Dian Yudha Risdianto, Hallen Naafi, Aliya Rachman, Ivana Sakura, India Margareth, Irish Shanty, Kinsella Puteri, Yosefina Pradjanata, Windy Maya, Esteryna Pasaribu, Gumgum Darmawan, Rung-Ching Chen, Bens Pardamean.

International Journal of Business