KETERKAITAN INFLASI DAN PERTUMBUHAN EKONOMI KOTA SURAKARTA: APLIKASI THRESHOLD MODEL

Abstract

This paper investigates the existence and the threshold level of and economic growth nexus in Surakarta, Central Java. This study employs an Error Correction Model (ECM) and boothstrapping technique using quarterly data from 2001:1 to 2012:4. The research finds that an inflation threshold is approximately at 1.62% (quarterly). In addition inflation has a negative impact on growth if it exceeds 1.62% (quarterly) but it has positive effect if the inflation is below this level. Our finding is useful for Central anks in designing the inflation targeting framework in the regional economic area.

Keywords: Economic growth, inflation, error correction model, threshold model