The Effect of Fiscal Policy and Foreign Direct Investment on Regional Economy in Indonesia

Agus Tri Basuki, Yunastiti Purwaningsih, Albertus Maqnus Soesilo, Mulyanto Mulyanto

Abstract


The purpose of this study was to analyze the influence of the poor population, government spending and foreign investment on regional economic growth in 20 provinces and divided into 2 regions, then compare the effectiveness of fiscal policies in the 2 regions. The paper utilizes the fixed‐effects and random‐effects techniques to estimate the panel regressions. The results showed that the right fiscal policy could increase economic growth in both the western and eastern regions of Indonesia. For the western region, revenue sharing is less effective than the eastern region in increasing economic growth, but conversely government spending on education, health and marine in the western region is more effective than the eastern region in increasing economic growth.


Keywords


Economic growth; Panel data regression; Fiscal policy; Fiscal capacity.

Full Text:

PDF

References


Abala, D.O. (2014). Foreign Direct Investment and Economic Growth: An Empirical Analysis of Kenyan Data. DBA Africa Management Review, 4(1), 62-83. https://doi.org/10.11648/j.ijefm.20160403.13

Afzal, M., Malik, M. E., Begum, I., Sarwar, K., & Fatima, H. (2012). Relationship among Education, Poverty and Economic Growth in Pakistan: An Econometric Analysis. Journal of Elementary Education, 22(1), 23-45. Retrieved from http://pu.edu.pk/images/journal/JEE/PDF-Files/3_Afzal_malik_ishrat%20final_2012JEE_Vol_22_no_1.pdf

Agustine, A. D. (2014). Pengembangan Sektor Kelautan dan Perikanan Untuk Meningkatkan Pendapatan Asli Daerah (Studi di Dinas Kelautan dan Perikanan Kabupaten Banyuwangi). Jurnal Administrasi Publik, 2(2), 276-280. Retrieved from https://media.neliti.com/media/publications/77702-ID-pengembangan-sektor-kelautan-dan-perikan.pdf

Ahmad, I. (2011). Regional Fiscal Independence in East Java Province Post Regional Autonomy. Economic Journal of Emerging Markets, 3(2), 189-198. https://doi.org/10.20885/ejem.v3i2.2330

Al-Shatti, A.S. (2014). The Impact of Public Expenditures on Economic Growth in Jordan. International Journal of economics and Finance, 6(10), 157. https://doi.org/10.5539/ijef.v6n10p157

Astria, S. A. (2014). Analisis Pengaruh Dana Alokasi Umum Dan Belanja Modal Terhadap Pertumbuhan Ekonomi Di Sumatera Selatan. Journal Ekonomi Pembangunan, 12(1), 41-54. https://doi.org/10.29259/jep.v12i1.4867

Bathla, S. (2017). Public Investment in Agriculture and Growth: An Analysis of Relationship in the Indian Context. Changing Contours of Indian Agriculture, 13-28. https://doi.org/10.1007/978-981-10-6014-4_2

Boediono. (1981). Teori Pertumbuhan Ekonomi. Yogyakarta: BPFE.

Chaudhry, N. I., Mehmood, A., & Mehmood, M. S. (2013). Empirical Relationship Between Foreign Direct Investment and Economic Growth. China Finance Review International. 3 (1), 26-41. https://doi.org/10.1108/20441391311290767

Grabova, P. (2014). Corruption impact on Economic Growth: An empirical analysis. Journal of Economic Development, Management, IT, Finance, and Marketing, 6(2), 57.

Gujarati, D. (2003). Basic Econometrics. Forth Edition. Singapore: McGraw-Hill.

Huda, H. M., Purnamadewi, Y. L., & Firdaus, M. (2015). Industrialisasi Perikanan Dalam Pengembangan Wilayah di Jawa Timur. TATALOKA, 17(2), 99-112. https://doi.org/10.14710/tataloka.17.2.99-112

Hussain, I. H., Khan, Z., & Rafiq, M. (2017). An Empirical Analysis of The Impact of Compositional Changes in Public Expenditure on Economic Growth: Time Series Evidence from Pakistan. Business & Economic Review, 9(1), 1-20. https://doi.org/10.22547/ber/9.1.1

Idrees, A. S., & Siddiqi, M. W. (2013). Does Public Education Expenditure Cause Economic Growth? Comparison of Developed and Developing Countries. Pakistan Journal of Commerce and Social Sciences (PJCSS), 7(1), 174-183. Retrieved from http://www.jespk.net/publications/116.pdf

Islam, R., Ghani, A.B.A., Abidin, I.Z. and Rayaiappan, J.M., (2017). Impact on Poverty and Income Inequality in Malaysia’s Economic Growth. Problems and Perspectives in Management, 15(1), 55-62. https://doi.org/10.21511/ppm.15(1).2017.05

Manik, R.E. and Hidayat, P., (2010). Analisis Dampak Desentralisasi Fiskal Terhadap Pertumbuhan Ekonomi Kabupaten/kota Pemekaran di Sumatera Utara. Jurnal Keuangan & Bisnis Program Studi Magister Manajemen Sekolah Tinggi Ilmu Ekonomi Harapan, 2(3), 217-226.

Muti’ah. (2017). The Effect of Regional Revenue, Revenue Sharing Fund, General Allocation Fund and Special Allocation Fund on Regional Economic Growth (Empirical Study In the 33 provinces in Indonesia Year 2011-2014). Research Journal of Finance and Accounting. 8(8), 102-112. Retrieved from https://www.iiste.org/Journals/index.php/RJFA/article/view/36777

Nindi, A. G., & Odhiambo, N. M. (2015). Poverty and Economic Growth in Swaziland: An Empirical Investigation. Managing Global Transitions: International Research Journal, 13(1), 59–74. Retrieved from http://www.fm-kp.si/zalozba/issn/1581-6311/13_059-074.pdf

Nworji, I. D., Okwu, A. T., Obiwuru, T. C., & Nworji, L. O. (2012). Effects of Public Expenditure on Economic Growth in Nigeria: A Disaggregated Time Series Analysis. International Journal of Management Sciences and Business Research, 1(7), 1-15. Retrieved from http://www.ijmsbr.com/Volume%201,Issue%207%20(6)%20Andy.pdf

Olabisi, A. S., & Oloni, E. F. (2012). Composition of Public Expenditure and Economic Growth in Nigeria. Journal of Emerging Trends in Economics and Management Sciences, 3(4), 403-407. Retrieved from http://citeseerx.ist.psu.edu/viewdoc/download;jsessionid=66B37A953FD3161F2C9014ED21DE60D9?doi=10.1.1.300.5903&rep=rep1&type=pdf

Purbadharmaja, I. B. P., Ananda, C. F., & Santoso, D. B. (2019). The Implications Of Fiscal Decentralization And Budget Governance On Economic Capacity And Community Welfare. foresight. 21(2), 227-249. https://doi.org/10.1108/fs-05-2018-0052

Oni, L. B., Aninkan, O. O., & Akinsanya, T. A. (2014). Joint Effects of Capital and Recurrent Expenditures in Nigeria’s Economic Growth. European Journal of Globalization and Development Research, 9(1), 530-543.

Sinnathurai, V. (2013). An Empirical Study on The Nexus of Poverty, GDP Growth, Dependency Ratio and Employment in Developing Countries. Journal of Competitiveness. 5 (2), 67-82. https://doi.org/10.7441/joc.2013.02.05

Škare, M., & Družeta, R. P. (2016). Poverty and Economic Growth: A Review. Technological and Economic Development of Economy, 22(1), 156-175. https://doi.org/10.3846/20294913.2015.1125965

Surjaningsih, N., Utari, G.D. & Trisnanto, B., (2012). Dampak Kebijakan Fiskal Terhadap Output dan Inflasi. Buletin Ekonomi Moneter dan Perbankan, 14(4), 389-420. https://doi.org/10.21098/bemp.v14i4.365

Tarigan, R. (2005). Ekonomi Regional Teori dan Aplikasi Edisi Revisi. Jakarta: Bumi aksara.

Todaro, M. P. (2000). Economic Development. New York University. New York.

Udoh, E. (2011). An Examination of Public Expenditure, Private Investment and Agricultural Sector Growth in Nigeria: Bounds Testing Approach. International Journal of Business and Social Science, 2(13), 285-292. Retrieved from https://ijbssnet.com/journals/Vol._2_No._13_Special_Issue_July_2011/34.pdf




DOI: https://doi.org/10.18196/jesp.21.1.5031

Article Metrics

Abstract view : 95 times
PDF - 51 times

Refbacks

  • There are currently no refbacks.


Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.


 

Office:
Redaksi JESP UMY, Gedung E2 Lantai 2, Fakultas Ekonomi dan Bisnis, Universitas Muhammadiyah Yogyakarta
Jalan Brawijaya, Tamantirto, Kasihan, Bantul, Daerah Istimewa Yogyakarta 55183
Telp: (0274) 387656 ext.184
Fax: (0274) 387646
Email: jesp@umy.ac.id


Jurnal Ekonomi & Studi Pembangunan (JESP) is licensed under Creative Commons Attribution 4.0 International License.