Abstract:
The most common economic problem in every country is inflation. Inflation can be
defined as a condition where the price of an item and or service increases in general and
is sustainable, which causes the price of other goods to also change. Indonesia is an oil
importing country because oil products from Indonesia do not meet people's demands. If
world oil prices increase, it will affect the economy in Indonesia. Money supply in a
country can also effect on inflation. This research was conducted to model inflation
using the variables of world oil prices and money supply in Indonesia. This study uses
the Autoregressive Distributed Lag (ARDL) model. In ARDL modeling the data must
be stationary and not cointegrated between variables. After testing the variables, we
found that there is no cointegration among the variables. Variables that significantly
effects are inflation in the previous month and inflation in the previous two months. The
form of the model obtained is = 0.003163 + 1.165771 𝑌𝑡−1 − 0.221558 𝑌𝑡−2.
