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

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.