THE ROLE OF INVESTMENT TO THE INDONESIAN ECONOMIC GROWTH

Abstract

As one of the developing countries, Indonesia needs to increase its economic growth in order to improve the country prosperity as well as to overcome poverty, unemployment, and inequality of income distribution matters. Additionally, Indonesia also needs to obtain both national and international economic competitiveness, specifically in facing Asean Economic Community. The aim of the research is to identify the role of investment to the Indonesian Economic Growth. The data used is the secondary data taken from The Central Bureau of Statistics and Indonesia Investment Coordinating Board. The data analysis technique used is Error Correction Model which is useful to examine the long-term correlation amongst economic variables and to capture the economic phenomena as well. The result of the research indicates that the domestic investment and foreign investment variables have a long-term relation with the economic growth. In a short-term, the domestic investment and foreign investment variables also show significant influences. There are positive and significant influences of the domestic investment to the economic growth. This research is expected to become a recommendation and information to the government and policy makers.