DEFLATION IN INDONESIA: IMPACTS, CAUSES, AND ECONOMIC POLICY SOLUTION

Abstract

This study discusses the phenomenon of deflation in Indonesia from May 2024 to September 2024, including its impact on the economy, the causes, and solutions through relevant economic policies. Deflation, which is characterized by a general decline in prices, can have a negative impact on the Indonesian economy by decreasing people's purchasing power, increasing the rate of layoffs, slowing economic growth, and decreasing investment levels. The analysis in this study identifies several main causes of deflation in Indonesia, including decreasing people's purchasing power, disproportionate wage increases, and increasing Value Added Tax (VAT). Relying on empirical data and a qualitative approach, this study discusses economic policy solutions to overcome deflation in Indonesia, in terms of monetary policy, fiscal policy, and non-monetary policy