Analysis of The Effect of Inflation on Indonesia's Trade Balance

Abstract

Inflation is one of the economic indicators that can affect a country's trade balance. This study aims to analyze the effect of inflation on Indonesia's trade balance in the 2019-2024 period using monthly data obtained from Bank Indonesia (BI) and the Central Statistics Agency (BPS). The method used in this research is simple linear regression analysis. Classical assumption testing includes normality, heteroscedasticity, and autocorrelation tests to ensure the validity of the model. The results showed that inflation has a positive, but insignificant relationship with Indonesia's trade balance. The coefficient of determination (R2) value of 0.001 indicates that the inflation variable only explains a small part of the variability of the trade balance, while other variables are more dominant. This finding provides insight that the effect of inflation on the trade balance is weak, so a more in-depth study of other variables that affect the performance of the trade balance is needed.