Oleh : Nina Valentika Valentika, Vivi Iswanti Nursyirwan, Ilmadi Ilmadi
Catalbas' research (2016) was modified in this study by adding an inflation variable. Vector Error Correction Model (VECM) is used in this study to predict variables. This study aims to model the exchange rate, inflation, imports and exports, forecast exchange rates, inflation, imports and exports, and determine the long-term relationship between variables. The inter-variable model in this study is VECM with a lag of 2, using a deterministic trend assuming none intercept no trend, and there are 2 cointegration. This research model is said to be good for predicting exports and imports with a tolerance limit of 5%. Based on the VECM, it is found that there is a long-term relationship for the variables that exist in the second cointegration equation to changes in imports, namely imports, exchange rates and exports in one previous period. There is a long-term relationship for the variables in the first cointegration equation to changes in inflation, namely inflation, exchange rates and exports in the previous period. There is a long-term relationship for the variables in the second cointegration equation to changes in inflation, namely imports, exchange rates and exports in the previous period.
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