| Summary: | This study investigates the relationship between foreign direct investment (FDI), exports, and
economic growth for Indonesia over the period 2003-2012 and analyst response of a variable
to other variable shock. The model used in this study is vector autoregression (VAR) to find
various Granger causal relations, impulse response function, and variance decomposition.
The results of Granger causality test show that there is unidirectional causality runs from
FDI to growth, exports to FDI, and exports to economic growth. The results of Granger
causality show growth driven FDI, export-driven FDI and export driven growth. Hypothesis
FDI led growth, export led FDI and export led growth is not evident in Indonesia. The results
of impulse response functions show that a shock to GDP positively responded by exports and
FDI (FDI had a negative response to the second and third quarters), as well as the response
of FDI to export shocks until twenty quarters. Meanwhile, the results of variance
decomposition shows that the variance error of FDI can be explained strongly enough by
export, then export variance error can be explained strongly enough by GDP, while GDP is
exogenous variable.
|
|---|