The Nexus Among Human Capital, Monetary Policy, and Regional Economic Growth: Comparison of the West and East Region Indonesia

Abstract

Regional economic growth is one of the key indicators of national economic development. This investigation is conducted to assess the nexus among human capital, monetary policy, population, investment, and regional economic growth in Indonesia with the comparison of the West and East regions. To assess the dynamic nexus among regional economic growth, human capital, monetary policy, population size, and investment, Indonesia's 34 provinces were grouped into two regions: the western and eastern parts. The research period is 2016 to 2023 using panel data. The model applied is a dynamic panel model, and the estimation method used is the generalized method of moments (GMM). The results indicate that previous-period regional economic growth, human capital, investment, and population size influence economic growth across all provinces, as well as in the western and eastern sub-regions. However, the magnitude of change varies across sub-regions. In the eastern region (KTI), monetary policy and population size have no meaningful effects on economic growth. These findings suggest that, in the long run, Human resource development should be the focus of government through education, research, and development to enhance regional economic growth. Additionally, investment should take environmental sustainability into account to support sustainable development.