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Abstract
This study compares the effectiveness of Vector Error Correction Model (VECM) and Error Correction Model (ECM) in the context of inflation and consumer price index. The focus of the analysis is on variables that have a long-run relationship even though they are not individually stationary. The VECM model produces . Meanwhile, the ECM Model shows (long-term) and (INFLASI(IHK(Short-term). The results show that VECM is suitable for understanding the short-run and long-run linkages between the variables, while ECM provides more specific insights on the direct effects and long-run equilibrium. A combination or adjustment of the two can provide a comprehensive understanding of the relationship between the variables.
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Copyright (c) 2024 Reza Pahlepi, Nurul Hidayati, Rizki Dwi Yanti, Tiara Enjelina, Haliza Aghnia
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
- Thierry, B. Jun, Z. Eric, D. D. Yannick, G. Z. S. Landry, K. Y. S. 2016. Causality Relationship between Bank Credit and Economic Growth: Evidence from a Time Series Analysis on a Vector Error Correction Model in Cameroon. Procedia - Social and Behavioral Sciences. doi: https://doi.org/10.1016/j.sbspro.2016.11.061
- Koo, T.T.R. Tan, D. T. Duval, D.T.2013. Direct air transport and demand interaction: A vector error-correction model approach. Journal of Air Transport Management. doi:https://doi.org/10.1016/j.jairtrama n.2012.12.005
- Zhang, S. Liu, M. Liu, M. Lei, Z. Zeng, G. Chen, Z. 2023. Day-ahead wind power prediction using an ensemble model considering multiple indicators combined with error correction. Applied Soft Computing. doi: https://doi.org/10.1016/j.asoc.2023.110873
- Haffar, A. Fur, E. L. 2021. Structural vector error correction modelling of Bitcoin price. The Quarterly Review of Economics and Finance. doi: https://doi.org/10.1016/j.qref.2021.02.010
- Sulistina, I. Hidayati. Sumar. 2017. Model Vector Auto Regression (VAR) and Vector Error Correction Model (VECM) Approach for Inflation Relations Analysis, Gross Regional Domestic Product (GDP), World Tin Price, Bi Rate and Rupiah Exchange Rate. Integrated Journal of Business and Economics.
References
Thierry, B. Jun, Z. Eric, D. D. Yannick, G. Z. S. Landry, K. Y. S. 2016. Causality Relationship between Bank Credit and Economic Growth: Evidence from a Time Series Analysis on a Vector Error Correction Model in Cameroon. Procedia - Social and Behavioral Sciences. doi: https://doi.org/10.1016/j.sbspro.2016.11.061
Koo, T.T.R. Tan, D. T. Duval, D.T.2013. Direct air transport and demand interaction: A vector error-correction model approach. Journal of Air Transport Management. doi:https://doi.org/10.1016/j.jairtrama n.2012.12.005
Zhang, S. Liu, M. Liu, M. Lei, Z. Zeng, G. Chen, Z. 2023. Day-ahead wind power prediction using an ensemble model considering multiple indicators combined with error correction. Applied Soft Computing. doi: https://doi.org/10.1016/j.asoc.2023.110873
Haffar, A. Fur, E. L. 2021. Structural vector error correction modelling of Bitcoin price. The Quarterly Review of Economics and Finance. doi: https://doi.org/10.1016/j.qref.2021.02.010
Sulistina, I. Hidayati. Sumar. 2017. Model Vector Auto Regression (VAR) and Vector Error Correction Model (VECM) Approach for Inflation Relations Analysis, Gross Regional Domestic Product (GDP), World Tin Price, Bi Rate and Rupiah Exchange Rate. Integrated Journal of Business and Economics.