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All Journal Al-Tijary : Jurnal Ekonomi dan Bisnis Islam
Muhammad Taufik Ridho
University of Groningen, Groningen, Netherlands
Economics, Econometrics & Finance

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Inflation Uncertainty in Indonesia: ARIMA–ARCH Evidence from an Islamic Economics Perspective Nurfitri Martaliah; Nova Erliyana; Muhammad Taufik Ridho
Al-Tijary Vol. 11 No. 2 (2026): AL-TIJARY VOL. 11, NO. 2, JUNI 2026
Publisher : Faculty of Islamic Economics and Business Sultan Aji Muhammad Idris State Islamic University Samarinda

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.21093/3pngm416

Abstract

This study examines the persistence and conditional uncertainty of Indonesian monthly inflation using an ARIMA(2,0,0)-ARCH(1) model and frames the evidence within Islamic economics, maqashid al-sharia, and sharia-compliant risk management. Monthly inflation data from January 2006 to December 2025 are used, with 2006-2024 as the estimation sample and 2025 as the out-of-sample evaluation period. The Augmented Dickey-Fuller test confirms level stationarity. Among six non-seasonal specifications, ARIMA(2,0,0) is selected because both autoregressive coefficients are significant, the inverse roots are stable, and the AIC is the lowest. ARCH-LM confirms conditional heteroskedasticity, while ARCH(1) removes the remaining first-order ARCH effect. A Student-t distribution improves information criteria and captures fat-tailed price shocks. The 2025 evaluation reports RMSE=0,663449, MAE=0,489019, and Theil U2=0,600060, indicating that the model outperforms a naive benchmark. The Islamic economic contribution lies in interpreting inflation volatility as a risk to hifz al-mal, the real value of contracts, basic consumption, halal business continuity, Islamic banking risk, and zakat-waqf planning. Thus, the model is not merely a forecasting device, but an early-warning instrument for maslahah-oriented price stabilization.
Co-Authors Nova Erliyana Nurfitri Martaliah