Monetary Variables and Dilemating of Misery Index: A Time Series Analysis Evidence in Indonesia

Abstract

The Misery Index captures economic hardship through unemployment and inflation, making it a key indicator of how economic shifts affect society. The study aims to analyze the relationship between monetary variables such as interest rates, money supply, and exchange rates, and the misery index. The originality of this research lies in its focus on the misery index as a comprehensive indicator of macroeconomic well-being, rather than analyzing inflation and unemployment separately. The data were obtained from Indonesia’s Central Bureau of Statistics and Bank Indonesia, covering a quarterly period. The method used is the Vector Error Correction Model (VECM). The study finds evidence of both long-term and short-term relationships between monetary variables and the misery index. The implications of these findings highlight that exchange rate stabilization and prudent monetary management can play a crucial role in mitigating economic hardship in Indonesia.