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An Analysis of the Effect of Consumption Spending and Investment on Indonesia’s Economic Growth

Author

Listed:
  • Muhammad Rafiy

    (Department of Economics, Faculty of Economics and Business, Universitas Halu Oleo, Kendari, Indonesia.)

  • Pasrun Adam

    (Department of Mathematics, Faculty of Math and Science, Universitas Halu Oleu, Kendari, Indonesia.)

  • Gamsir Bachmid

    (Department of Economics, Faculty of Economics and Business, Universitas Halu Oleo, Kendari, Indonesia.)

  • Zainuddin Saenong

    (Department of Economics, Faculty of Economics and Business, Universitas Halu Oleo, Kendari, Indonesia.)

Abstract

This study aims to examine the effect of investment and consumption spending on Indonesia’s economic growth. The data used is the quarterly time series data from the first quarter of year 2003 to the fourth quarter of year 2013, comprising consumption spending, investment and economic growth. For the purpose of analysis, the autoregressive distributed lag (ARDL) model is used. The result of the study reveals that there are long-run and short-run effects of consumption spending on economic growth. Meanwhile, the effect of investment on economic growth is not significant. The study also reveals that the increase in government spending on economic growth is 1.88% if the consumption spending rises by 1%.

Suggested Citation

  • Muhammad Rafiy & Pasrun Adam & Gamsir Bachmid & Zainuddin Saenong, 2018. "An Analysis of the Effect of Consumption Spending and Investment on Indonesia’s Economic Growth," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 22(3), pages 757-770, Summer.
    • Handle: RePEc:eut:journl:v:22:y:2018:i:3:p:757
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