Do foreign direct investment, trade and their interactions affect economic growth in Indonesia?
This study examines the direct and indirect impacts of foreign direct investment, exports, and imports on Indonesia's long-term and short-term economic growth. To this end, we used quarterly data for 2005.1–2021.4 sourced from Statistics Indonesia, the Bank of Indonesia, and the Bank of St. Lo...
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| Format: | Article |
| Language: | English |
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Master Program in Economics, Graduate Program of Universitas Jambi
2023-04-01
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| Series: | Jurnal Perspektif Pembiayaan dan Pembangunan Daerah |
| Subjects: | |
| Online Access: | https://online-journal.unja.ac.id/JES/article/view/22698 |
| _version_ | 1797835210020093952 |
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| author | Heppi Millia Ernawati Ernawati Heriberta Heriberta |
| author_facet | Heppi Millia Ernawati Ernawati Heriberta Heriberta |
| author_sort | Heppi Millia |
| collection | DOAJ |
| description |
This study examines the direct and indirect impacts of foreign direct investment, exports, and imports on Indonesia's long-term and short-term economic growth. To this end, we used quarterly data for 2005.1–2021.4 sourced from Statistics Indonesia, the Bank of Indonesia, and the Bank of St. Louis. The analytical tools employed were the autoregressive model of the lag distribution (ARDL) and the error correction model (ECM-ARDL). Findings showed that foreign direct investment, exports, and imports directly affected Indonesia's economic growth. However, while the two formers had an impact only in the short run, the latter also did so in the long run. In addition, foreign direct investment also indirectly influenced economic growth through exports in the short and long run, whereas this was not the case with imports. Based on these findings, we argue for policy recommendations. To begin with, the government should encourage foreign direct investment, which may gradually replace imported raw materials with local raw resources, thereby creating an upstream connection while slowing the rate of imports. Furthermore, the government needs to adopt a policy of downstream processing of primary commodities into industrial commodities to increase export value and expand employment opportunities.
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| first_indexed | 2024-04-09T14:49:30Z |
| format | Article |
| id | doaj.art-050ce8ed1d4d499e810e7b849b6040b5 |
| institution | Directory Open Access Journal |
| issn | 2338-4603 2355-8520 |
| language | English |
| last_indexed | 2024-04-09T14:49:30Z |
| publishDate | 2023-04-01 |
| publisher | Master Program in Economics, Graduate Program of Universitas Jambi |
| record_format | Article |
| series | Jurnal Perspektif Pembiayaan dan Pembangunan Daerah |
| spelling | doaj.art-050ce8ed1d4d499e810e7b849b6040b52023-05-02T09:41:24ZengMaster Program in Economics, Graduate Program of Universitas JambiJurnal Perspektif Pembiayaan dan Pembangunan Daerah2338-46032355-85202023-04-0111110.22437/ppd.v11i1.22698Do foreign direct investment, trade and their interactions affect economic growth in Indonesia?Heppi Millia0Ernawati Ernawati1Heriberta Heriberta2Department of Economics, Faculty of Economics and Business, Universitas Halu Oleo, IndonesiaDepartment of Economics, Faculty of Economics and Business, Universitas Halu Oleo, IndonesiaDepartment of Economics, Faculty of Economics and Business, Universitas Jambi, Indonesia This study examines the direct and indirect impacts of foreign direct investment, exports, and imports on Indonesia's long-term and short-term economic growth. To this end, we used quarterly data for 2005.1–2021.4 sourced from Statistics Indonesia, the Bank of Indonesia, and the Bank of St. Louis. The analytical tools employed were the autoregressive model of the lag distribution (ARDL) and the error correction model (ECM-ARDL). Findings showed that foreign direct investment, exports, and imports directly affected Indonesia's economic growth. However, while the two formers had an impact only in the short run, the latter also did so in the long run. In addition, foreign direct investment also indirectly influenced economic growth through exports in the short and long run, whereas this was not the case with imports. Based on these findings, we argue for policy recommendations. To begin with, the government should encourage foreign direct investment, which may gradually replace imported raw materials with local raw resources, thereby creating an upstream connection while slowing the rate of imports. Furthermore, the government needs to adopt a policy of downstream processing of primary commodities into industrial commodities to increase export value and expand employment opportunities. https://online-journal.unja.ac.id/JES/article/view/22698ARDL modelExportsForeign direct investmentImports |
| spellingShingle | Heppi Millia Ernawati Ernawati Heriberta Heriberta Do foreign direct investment, trade and their interactions affect economic growth in Indonesia? Jurnal Perspektif Pembiayaan dan Pembangunan Daerah ARDL model Exports Foreign direct investment Imports |
| title | Do foreign direct investment, trade and their interactions affect economic growth in Indonesia? |
| title_full | Do foreign direct investment, trade and their interactions affect economic growth in Indonesia? |
| title_fullStr | Do foreign direct investment, trade and their interactions affect economic growth in Indonesia? |
| title_full_unstemmed | Do foreign direct investment, trade and their interactions affect economic growth in Indonesia? |
| title_short | Do foreign direct investment, trade and their interactions affect economic growth in Indonesia? |
| title_sort | do foreign direct investment trade and their interactions affect economic growth in indonesia |
| topic | ARDL model Exports Foreign direct investment Imports |
| url | https://online-journal.unja.ac.id/JES/article/view/22698 |
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