ANALYSIS OF EFFECT OF MACROECONOMIC VARIABLES ON INFLATION AND ECONOMIC GROWTH IN INDONESIA

Abstract

Economic growth is a macro economic problem in the long run. Economic growth in
a country can be positive and negative. This never happened in the country of Indonesia in
mid 1997 until mid 1998 that describe the state of development of the Indonesian economy
declined. One reason is still the intensive investment activity in the country, including the
flow of foreign investment, especially in the form of foreign direct investment (FDI) and
domestic investment (DCI).
The type of data used are secondary data 21 years (1993-2013), using simultaneous
equations. Test the assumptions used in the study was a test of heteroscedasticity,
autocorrelation test, stationary test, cointegration test and granger causality test. Test the
hypothesis by using the F test and t test. Endogenous variables are used, namely inflation and
economic growth, while exogenous variables used the money supply, interest rates, foreign
direct investment (FDI), domestic Investment (DCI) and labor.
The results showed that the variables of the money supply, interest rates and
economic growth equation no significant effect on inflation, except interest rates.
Furthermore, the variable inflation, foreign direct investment, domestic investment and labor
significant effect on economic growth equation, except inflation and foreign direct
investment.
Keywords : GDP, Inflation, Money Supply, Interest Rates, Investment and Labor