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Digitalization Through E-Commerce And Its Effects On Inflation In Indonesia

Author

Listed:
  • Donni Fajar Anugrah

    (Bank Indonesia)

  • Novi Maryaningsih

    (Bank Indonesia)

  • Andi Widianto

    (Bank Indonesia)

  • Tri Kurnia Ayu S.

    (Bank Indonesia)

  • Fickry Widya N.

    (Bank Indonesia)

  • Arief N. Rachman

    (Bank Indonesia)

  • Minda Putri Dwinanda

    (Bank Indonesia)

  • Citra Amanda

    (Bank Indonesia)

  • Eunike Vrigie Ruth Y.

    (Bank Indonesia)

  • Tio Angie P. Samosir

    (Bank Indonesia)

  • Naufal Alfaraby Winandita

    (Bank Indonesia)

  • Shania Rahmi

    (Bank Indonesia)

Abstract

In the midst of the rapid development of the digital economy in Indonesia, Indonesia continues to strive to keep domestic prices stable. One of a part of digitalization development is the presence of e-commerce, which has the potential to reduce the inflation rate through various channels. Changes in producer and consumer behavior that shift to online markets create a more competitive and transparent market environment. The development of ecommerce is also inseparable from innovations in the financial sector, especially digital payment systems, which are an important component in contributing to the fluidity of e-commerce transactions. However, the behavioral changes that occur can cause bias in the calculation of the consumer price index. We analyze the impact of digitalization through ecommerce on inflation in Indonesia on a national and regional scale. This study also analyzes the impact of payment systems on e-commerce and seek out the possibility of bias in the calculation of inflation. The method used is GMM (Generalized Method of Moments) with a panel data range of 34 provinces from 2018-2023 with monthly frequency. The results of the quantitative analysis are also supported by the findings of the field study. The results of this study show that digitalization through e-commerce consistently has a significant negative effect on national and regional core inflation. The study also finds a positive impact of payment systems on e-commerce transactions and finds bias in inflation calculation. In-depth regional analysis from the representative provinces of North Sumatra, East Java, and South Sulawesi also supports the findings of this study. Based on the results of this study, it is important for Bank Indonesia as a monetary policy maker to strengthen its strategic plan in utilizing digitalization through e-commerce as an effort to control inflation in Indonesia.

Suggested Citation

  • Donni Fajar Anugrah & Novi Maryaningsih & Andi Widianto & Tri Kurnia Ayu S. & Fickry Widya N. & Arief N. Rachman & Minda Putri Dwinanda & Citra Amanda & Eunike Vrigie Ruth Y. & Tio Angie P. Samosir & , 2024. "Digitalization Through E-Commerce And Its Effects On Inflation In Indonesia," Working Papers WP/01/2024, Bank Indonesia.
    • Handle: RePEc:idn:wpaper:wp012024
    as

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    References listed on IDEAS

    as
    1. Yuriy Gorodnichenko & Viacheslav Sheremirov & Oleksandr Talavera, 2018. "Price Setting in Online Markets: Does IT Click?," Journal of the European Economic Association, European Economic Association, vol. 16(6), pages 1764-1811.
    2. Junjie Lv & Zichen Wang & Yuqing Huang & Tong Wang & Yuanzhuo Wang, 2020. "How Can E-Commerce Businesses Implement Discount Strategies through Social Media?," Sustainability, MDPI, vol. 12(18), pages 1-19, September.
    3. Karyne B. Charbonneau & Alexa Evans & Subrata Sarker & Lena Suchanek, 2017. "Digitalization and Inflation: A Review of the Literature," Staff Analytical Notes 17-20, Bank of Canada.
    4. Abbas, Syed K. & Bhattacharya, Prasad Sankar & Sgro, Pasquale, 2016. "The new Keynesian Phillips curve: An update on recent empirical advances," International Review of Economics & Finance, Elsevier, vol. 43(C), pages 378-403.
    5. W. Erwin Diewert, 1998. "Index Number Issues in the Consumer Price Index," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 47-58, Winter.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Digitalization; Inflation; E-Commerce; GMM;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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