ANALYSIS OF FACTORS AFFECTING THE ECONOMIC GROWTH RATE IN INDONESIA

Abstract

By                   : Jimmy Prasetya

Advisors          : Dr. Erni Febrina Harahap, S.E, M.Si ¹

                       Drs. Firdaus Sy, M.P ²

SUMMARY

Economic growth is a long-term macroeconomic issue. The Indonesian state from mid 1997 to mid 1998 describing the state of Indonesia's economic development declining, making domestic investment inhibited. The solution that is considered reliable to overcome the low barrier of domestic investment is to bring in capital from abroad. One of the macroeconomic indicators that can be used to measure or see the stability of a country's economy is inflation. In an economic perspective, inflation is a monetary phenomenon in a country where inflationary ups and downs tend to cause economic turmoil. Raising interest rates is the main tool to combat inflation by making borrowing costs more expensive then the amount of money circulating in the community will decrease and the country's economic activity will decrease.

The design of this study using quantitative causal design as for independent variables in research are investment, inflation, SBI interest rate, and economic crisis while the dependent variable of economic growth in Indonesia. The study of data to be analyzed in this research is secondary data with time series (time series). The method used in this research is the estimation method of Error Correction Model (ECM) or known as error correction model is a model used to see the long-term and short-term effect of each free variable change to the dependent variable

The results of the Error Correction Model estimation in the short term Investment and SBI interest rates do not have a significant influence on economic growth in Indonesia, but inflation has a significant effect on economic growth in Indonesia. For long-term estimation of investment variables and SBI rates have a significant effect on economic growth in Indonesia. While Inflation does not have a significant effect on economic growth in Indonesia.

Keywords: economic growth, investment, inflation, SBI rate, economic crisis