Macroeconomic Factors Driving Inflation: A Panel Data Study of ASEAN Countries

The increase in price for consumer goods and services has an impact on the economic growth of a country. Many of the previous studies had been done to determine what really causes inflation across many countries. Referring to the existing variables that impact the growth of inflation, this study aims to ascertain what factors cause inflation in four selected countries, namely Malaysia, Indonesia, Thailand and Vietnam. The study also investigates the relationship between inflation with several independent variables, which consist of money supply, interest rate, unemployment, gross domestic product, exchange rate, government expenditure and imported goods and services. The data used in this study were obtained from various sources such as the World Bank, the International Monetary Fund (IMF), as well as Eikon. The type of research in this study is panel data, consisting of time series from the year 2008 to 2023 annually. The diagnostic tests conducted include a normality test, a Variance Inflation Factor (VIF) test, a Modified Wald Test, as well as a unit root test for each variable. To estimate the panel data, Pooled Ordinary Least Squares (POLS) is used. The study finds that among seven variables, government expenditure, interest rate and imported goods and services significantly affected the inflation. Interest rate and imported goods and services have a positive relationship with inflation, while government expenditure has a negative relationship with inflation.