Relationship between Consumer Price Index and Producer Price Index in Indonesia with Large Model Econometrics

Inflation or price level targeting is becoming more popular as a policy objective of the central bank's monetary policy and fiscal policy to guide them. Policy choices calculated price level is as important as the targeted inflation rate due to the different indices can produce different levels of inflation. Price index is a weighted average of the price of each item. Therefore, the selection of the price index can be detrimental to the credibility of the central bank's policy as well as their success. The purpose of this study was to assess the long-term relationships and short-term between the two indexes are widely used: the Consumer Price Index (CPI) and Wholesale Price Index (WPI) of 2002 to the Year 2012 Quartalan using Root Test test, causality test, cointegration test, and correction model