Spatial vector autoregressive model with calendar variation for East Java inflation and money supply

Inflation is a macroeconomic variable that can indicate the economy of a country, so it needs to be managed to a stability point. One way to control inflation is to regulate the money supply that was made by the Central Bank. This shows the relationship between inflation and money supply. In addition, inflation and money supply have space-time relationship. One character of inflation and money supply in Indonesia is the effect of Eid al Fitr on these two variables. The purpose of this study is to model the inflation and the money supply simultaneously with the effect of calendar variation Eid al Fitr in four cities in East Java, Indonesia namely Surabaya, Malang, Kediri and Jember. The model used is spatial vector autoregressive model with calendar variation. The result shows that there is a relationship between inflation and money supply although not in all cities, there is a space-time relationship on inflation as well as on the money supply. In addition, there is an effect of Eid al Fitr on inflation and the money supply in the four cities.