Dynamic impact of macroeconomic factors and government expenditure shocks to food inflation in Indonesia during and after COVID-19

¹ Department of Mathematics and Data Science, Faculty of Mathematics and Natural Science, Universitas Andalas, Padang, 25163, Indonesia
² Department of Mathematics, Faculty of Science and Mathematics, Universiti Pendidikan Sultan Idris, Malaysia

^* Corresponding author: ddevianto@sci.unand.ac.id

Abstract

This study analyzes the dynamic effects of macroeconomic factor and government expenditure on food inflation in Indonesia (2020–2024) using a Time-Varying Vector Autoregressive (TV-VAR) model. The results reveal that food inflation is dynamic and unstable during the pandemic transition period, forming a pronounced V-shape pattern. The Impulse Response Function (IRF) analysis shows that shocks to government expenditure significantly and permanently increase food inflation in both periods (during and after the pandemic). This indicates that expansionary fiscal policies, while effective in stimulating economic recovery, also create persistent inflationary pressures. GDP shocks have a positive but short-lived impact. Meanwhile, the exchange rate effect exhibits a structural shift: relatively small during the pandemic, but becoming stronger and faster in the post-pandemic period, where depreciation significantly drives up food inflation. These findings confirm that maintaining food price stability to safeguard food security in Indonesia requires adjusting fiscal and monetary policies to reduce the risk of macroeconomic shocks. It is essential to strengthen policy responses during and after periods of disaster, such as the ongoing pandemic, to stabilize food prices, protect household purchasing power, and ensure sustainable economic recovery.