Dynamics of Inflation and Economic Stability in Facing Global Uncertainty
DOI:
https://doi.org/10.65739/archipel.v1i7.43Keywords:
Economic Stability, Global Uncertainty, Inflation Dynamics, Inflation Uncertainty, Macroeconomic PolicyAbstract
Global uncertainty has significantly transformed inflation dynamics, making inflation more volatile and less predictable, thereby challenging economic stability. This study aims to analyze the dynamics of inflation and their impact on economic stability in the context of global uncertainty, emphasizing the mediating role of inflation uncertainty. This research employs a qualitative approach with a descriptive-analytical design based on a systematic literature review of recent empirical studies published between 2021 and 2025. Data were collected through documentation techniques from reputable international journals and institutional reports, and analyzed using qualitative content analysis, thematic categorization, and conceptual synthesis. The findings reveal that economic policy uncertainty, geopolitical risks, and energy price shocks are the primary drivers of inflation volatility, while inflation uncertainty plays a crucial role in transmitting global shocks to macroeconomic instability. These factors collectively weaken economic performance by reducing investment, consumption, and employment. The discussion highlights that the impact of uncertainty is asymmetric, with developing countries being more vulnerable due to structural and institutional limitations. Furthermore, effective policy responses such as credible communication, inflation targeting, and fiscal-monetary coordination are essential in mitigating these adverse effects. In conclusion, maintaining economic stability in an era of global uncertainty requires not only controlling inflation but also managing uncertainty through integrated and adaptive policy strategies.
References
Abaidoo, R., & Agyapong, E. (2022). Commodity price volatility, inflation uncertainty and political stability. International Review of Economics, 69, 351–381. https://doi.org/10.1007/s12232-022-00395-3
Adeosun, O., Tabash, M., Vo, X., & Anagreh, S. (2022). Uncertainty measures and inflation dynamics in selected global players: A wavelet approach. Quality & Quantity, 1–36. https://doi.org/10.1007/s11135-022-01513-7
Akindinova, N., Bessonov, V., Pukhov, S., Safonov, I., & Smirnov, S. (2022). Inflation challenges of the pandemic period and sanctions: Lessons for the future. Voprosy Ekonomiki. https://doi.org/10.32609/0042-8736-2022-5-5-25
Ali, K., Hongbing, H., Liew, C., & Jianguo, D. (2023). Governance perspective and the effect of economic policy uncertainty on financial stability: Evidence from developed and developing economies. Economic Change and Restructuring, 56, 1971–2002. https://doi.org/10.1007/s10644-023-09497-6
Amelia, D., Suliyanto, S., Nugraha, G., & Suyono, B. (2025). Analysis of global economic uncertainty impact on Indonesia’s financial and trade volatility using vector error correction model with exogenous variables. BAREKENG: Jurnal Ilmu Matematika dan Terapan. https://doi.org/10.30598/barekengvol19iss4pp2963-2980
Asafo-Adjei, E., Qabhobho, T., & Adam, A. (2023). Conditional effects of local and global risk factors on the co-movements between economic growth and inflation: Insights into G8 economies. Heliyon, 9. https://doi.org/10.1016/j.heliyon.2023.e19570
Banna, H., Alam, A., Chen, X., & Alam, A. (2023). Energy security and economic stability: The role of inflation and war. Energy Economics. https://doi.org/10.1016/j.eneco.2023.106949
Binder, C., Ozturk, E., & Sheng, X. (2025). The effects of inflation uncertainty on firms and the macroeconomy. Journal of International Money and Finance. https://doi.org/10.1016/j.jimonfin.2024.103239
Cano-Espinosa, D. (2025). Does inflation targeting reduce economic uncertainty? Evidence from Mexico. Economies. https://doi.org/10.3390/economies13040109
Chaâbane, N. (2024). Dynamics of global energy, geopolitics, and climate policy on inflation: A cross-regional analysis. Development and Sustainability in Economics and Finance. https://doi.org/10.1016/j.dsef.2024.100017
Chowdhury, K. (2023). Relationships between inflation, output growth, and uncertainty in the era of inflation stabilization: A multicountry study. Empirical Economics, 66, 623–650. https://doi.org/10.1007/s00181-023-02473-z
Dirgantara, S., & Suryadarma, M. (2025). Inflation, monetary policy, and systemic risks: Global insights from the post-crisis era. Moneta: Journal of Economics and Finance. https://doi.org/10.61978/moneta.v3i4.930
Gong, X., Lu, J., Xiong, X., & Zhang, W. (2022). Higher-order dynamic effects of uncertainty risk under thick-tailed stochastic volatility. Financial Innovation, 8. https://doi.org/10.1186/s40854-022-00370-5
Ha, J., So, I., & Yao, Y. (2023). Global inflation uncertainty: Measures and applications. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.4353155
Köse, T., & Öztop, A. (2025). The effects of inflation uncertainty on economic growth rates in inflation targeting emerging markets. Economy of Regions. https://doi.org/10.17059/ekon.reg.2025-2-21
Lastauskas, P., & Nguyen, A. (2021). Global impacts of US monetary policy uncertainty shocks. ECB Working Paper Series. https://doi.org/10.2139/ssrn.3797133
Li, T., Londono, J., & S. (2025). The global transmission of inflation uncertainty. FEDS Notes. https://doi.org/10.17016/2380-7172.3692
M, K., Dsouza, A., V., & Kanse, V. (2024). Macroeconomic factors and their impact on stock market volatility: Trends, drivers, and policy recommendations. International Journal of Scientific Research in Engineering and Management. https://doi.org/10.55041/ijsrem39409
Purwanto, H. (2025). Analysis of the effect of global inflation on investment decision making by domestic investors in Indonesia. International Journal for Science Review. https://doi.org/10.71364/ijfsr.v2i5.46
Ren, Y., Klein, T., Jiang, Y., C., & Yang, X. (2024). Dynamic spillovers among global oil shocks, economic policy uncertainty, and inflation expectation uncertainty under extreme shocks. Journal of International Financial Markets, Institutions and Money. https://doi.org/10.1016/j.intfin.2024.101951
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2026 Salamah Utami
This work is licensed under a Creative Commons Attribution 4.0 International License.
