The VECM implementation for measuring the impact of monetary variables on Indonesia Property Prices Index

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The basic human need for housing makes property investment safer than other sectors because demand tends to be stable despite changing economic conditions. The decision to invest is influenced by various aspects, including economic variables, including GDP, property credit growth, non-performing loans (NPLs), interest rates, exchange rates, and money supply, which are then examined for their influence on the Residential Property Price Index (RPPI) in Indonesia through this research using a Vector Error Correction Model (VECM) with quarterly data from 2003 to 2022. The findings show that GDP, interest rates, and money supply have a significant long-term impact on the RPPI. In the short-term, GDP and property credit growth have a negative impact on RPPI, while NPL and exchange rate do not. Causality tests indicate a bidirectional relationship between NPL and GDP with RPPI, with probability values exceeding 0.05. This study provides valuable insights into the monetary factors affecting residential property prices and suggestions for future research.

Acknowledgment
The authors gratefully acknowledge Ahmad Dahlan University for the support and facilities provided in conducting this research. They also greatly appreciate the academic resources that supported the data collection process and careful analysis of our findings. Besides, the authors express their gratitude to Bank Indonesia and Badan Pusat Statistik for their invaluable contribution to the data used in this research.

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    • Table 1. Results of the augmented Dickey-Fuller unit root test for stationarity
    • Table 2. Lag order selection criteria
    • Table 3. Granger causality test results
    • Table 4. VECM test result on RPPI
    • Conceptualization
      Rifki Khoirudin
    • Data curation
      Rifki Khoirudin
    • Formal Analysis
      Rifki Khoirudin, Pramono Hari Adi, Suharno
    • Investigation
      Rifki Khoirudin, Pramono Hari Adi, Suharno
    • Resources
      Rifki Khoirudin
    • Software
      Rifki Khoirudin
    • Validation
      Rifki Khoirudin, Pramono Hari Adi, Suharno
    • Visualization
      Rifki Khoirudin
    • Writing – original draft
      Rifki Khoirudin
    • Methodology
      Pramono Hari Adi, Suharno
    • Supervision
      Pramono Hari Adi, Suharno
    • Writing – review & editing
      Pramono Hari Adi, Suharno