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The Mediating Role of Investment on Economic Growth Determinants in Indonesia: An Empirical Analysis

In: Proceedings of the 9th International Conference on Accounting, Management, and Economics 2024 (ICAME 2024)

Author

Listed:
  • Abdul Hamid Paddu

    (Hasanuddin University)

  • Indraswati Tri Abdi Reviane

    (Hasanuddin University)

  • Nur Dwiana Sari Saudi

    (Hasanuddin University)

  • Fitriwati Djam’an

    (Hasanuddin University)

  • Mirzalina Zaenal

    (Hasanuddin University)

  • Muhammad Jibril Tajibu

    (Hasanuddin University)

Abstract

Indonesia’s economic growth has been inconsistent, with various macroeconomic factors influencing its trajectory. The role of investment as a mediator in this process remains unclear. This study aims to examine the mediating effect of investment on the relationship between key macroeconomic variables (exchange rate, inflation, and interest rate gap) and economic growth in Indonesia. Using time series data from 2002 to 2021, this study employs multiple linear regression analysis with the Least Squares (LS) model. The mediating role of investment is tested using Baron and Kenny’s (1986) approach. The findings reveal that (1) exchange rate has a significant positive effect on investment; (2) inflation negatively impacts investment; (3) the interest rate gap positively influences investment. However, investment does not significantly mediate the relationship between these variables and economic growth. While macroeconomic factors significantly influence investment in Indonesia, the mediating role of investment in driving economic growth is not substantiated. This suggests the need for a more nuanced understanding of growth determinants in the Indonesian context.

Suggested Citation

  • Abdul Hamid Paddu & Indraswati Tri Abdi Reviane & Nur Dwiana Sari Saudi & Fitriwati Djam’an & Mirzalina Zaenal & Muhammad Jibril Tajibu, 2025. "The Mediating Role of Investment on Economic Growth Determinants in Indonesia: An Empirical Analysis," Advances in Economics, Business and Management Research, in: Mursalim Nohong & Fitra Roman Cahaya & Phung Minh Tuan & Arifuddin Mannan & Anas Iswanto Anwar & Ria (ed.), Proceedings of the 9th International Conference on Accounting, Management, and Economics 2024 (ICAME 2024), pages 2707-2715, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-758-8_219
    DOI: 10.2991/978-94-6463-758-8_219
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    Keywords

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    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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