INFLUENCE OF FOREIGN DEBT, FOREIGN CAPITAL PLANTATION AND RUPIAH CURRENT VOLATILITY ON INDONESIAN ECONOMIC GROWTH

Abstract

By                               : Mery Oktari Zulvia

Adviser I                     : Antoni, SE., ME., Ph.D

Adviser  II                  : Helmawati, SE., M.Si

SUMMARY

One important benchmark in determining the success of economic development is economic growth that illustrates a real impact of development policies implemented. Economic growth is closely related to the process of increasing the production of goods and services in the economic activities of society. Economic growth can not be separated from capital or labor and technology. Provision of capital resources is needed in the implementation of development. The source of this fund is realized in the form of investment (Investment). It is very necessary to support economic growth, as well as employment opportunities. Investment funds can be obtained from government, public (private), foreign loans and foreign private investment.

Economic growth is defined as an increase in the ability of an economy to produce goods and services. Economic growth is more indicative of quantitative change and is usually measured using gross domestic product (GDP) data or income or output per capita. Gross Domestic Product (GDP) is the total market value of final goods and services produced within an economy over a period of time (usually one year).

Economic growth is a long-term economic problem and is influenced by many factors. Economic growth becomes one of the benchmarks for the progress and development of a country, in order to create the welfare of the people. This study has a purpose to prove how in the short-run and long-term variable of foreign debt, foreign investment and volatility of rupiah exchange rate have an influence on economic growth of Indonesia. The data used in this study is the 17-year time series data from 2000 to 2016, the data used is obtained from the Central Bureau of Statistics and World Bank. The method used in this research is Error Correction Model (ECM). To see a long-term relationship is used Cointegration Test, while to see the short-term relationship used Error Correction Model.

The results of this study indicate that in the short term foreign debt has a positive effect while in the long run negatively affect. Foreign investment has a positive effect in the short and long term. The volatility of the rupiah exchange rate has a positive effect in the short term, as well as in the long run.

Keywords: Economic Growth, Foreign Debt, Foreign Investment, Volatility of Rupiah Exchange Rate.