The relationship between economic growth and macroeconomic indicators in Indonesia

Abstract

This study aims to determine the relationship between macroeconomics variables, including investment, export, and e-money transactions towards economic growth in Indonesia. This research applied Vector Error Correction Model (VECM) in order to determine long-term and short-term relationships between the variables. This research used quarterly time-series data during 2010-2017 from the Central Bank of Indonesia, Statistics Indonesia and Investment Coordination Board in Indonesia. For the analysis purposes, the study used a stationary test, long-lag test, cointegration test, and a causality test. The empirical results of this study show that in both short and long terms, investment has a positive impact on economic growth in Indonesia, while export and e-money transactions have a negative impact on economic growth in Indonesia during the research period. These findings provide insights for future research on investments, as both physical investment and human investment may potentially boost economic growth.