DETERMINANT OF FOOD INFLATION
THE CASE OF INDONESIA
In this paper, we investigate the determinants of food inflation in Indonesia. Using
quarterly data (2008:Q1 to 2017:Q4) and a GMM estimator, we show that backwardlooking
and forward-looking expectations have a strong impact on food inflation.
Additionally, we show that the determinants of general food price inflation, such as
food production, agriculture sector output, infrastructure, food import, agriculture
sector credit, demand level (M1/consumption), and seasonal event (Eid Mubarak), are
highly significant. Backward-looking and forward-looking expectations, domestic oil
price, and level of demand have contributed to high food price while factors relating to
general food price inflation have reduced food price.
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