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The Antecedent of Domestic Investment in Indonesia: Auto Regressive Distributed Lag Approach

Author

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  • Thomas Galih Pramudita

    (Magister Student of Economics Education, Faculty of Economics, Yogyakarta State of University, Colombo Street No.1 Karang Malang, Caturtunggal Distrik, Yogyakarta Province 55281, Indonesia,)

  • Setyabudi Indartono

    (Department of Management, Faculty of Economics, Yogyakarta State of University, Colombo Street No.1 Karang Malang, Caturtunggal Distrik, Yogyakarta Province 55281, Indonesia,)

  • Maimun Sholeh

    (Department of Economics Education, Faculty of Economics, Yogyakarta State of University, Colombo Street No.1 Karang Malang, Caturtunggal Distrik, Yogyakarta Province 55281, Indonesia.)

Abstract

Investment is one of the important factor in a developing country's economy such as Indonesia which really needs the flow of investment to create jobs. The Investment comes from two sources, namely foreign investment and domestic investment. However, the foreign investment can cause problems for national companies in helping the country's economic development if there is no strict regulation from the government. These obstacles come from the financial of foreign investment as the sources to fund the long-term. Therefore, it is important for the government to empower domestic investment as one of the income sources in establishing an equitable economy. Although the current Indonesian economic situation has shown a positive direction, domestic investment growth has not shown a satisfactory increase yet. This problem for Indonesia, which currently more focuses on the growth of the national industry. Thus, this study aims to determine the determinants of macroeconomic variables on the development of domestic investment in Indonesia in the period 1996-2017. The method used in this study is the auto regressive distributed lag method. The results showed that inflation and interest rates had no effect on long run but had effect on a short-run in domestic investment. While the exchange rate had effect on both short and long-run in domestic investment and economic growth had effect on long run in domestic investment.

Suggested Citation

  • Thomas Galih Pramudita & Setyabudi Indartono & Maimun Sholeh, 2019. "The Antecedent of Domestic Investment in Indonesia: Auto Regressive Distributed Lag Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 9(2), pages 138-144.
    • Handle: RePEc:eco:journ1:2019-02-17
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    References listed on IDEAS

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    More about this item

    Keywords

    Macroeconomic Variables; Domestic Investment; ARDL;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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