Do Macroeconomic Variables and Effective Fiscal Policies Affect Indonesian Economic Development?

Abstract

This study aims to examine the impact of demographic, poverty, fiscal policy, and investment on economic growth in 20 provinces. This study uses fixed effect techniques to estimate panel regression. The data used from 2008 to 2021 comes from the Central Bureau of Statistics and the Ministry of Finance of the Republic of Indonesia. The results of the study show that population, poverty, balanced funds, government spending, foreign capital influence on economic growth. The impact of government spending through education, health, agriculture, fisheries, and marine sectors has not been effective in encouraging regional economic growth. Other results from BPK's opinion on Regional Government Financial Reports have an impact on encouraging economic growth. These findings indicate that the government must take the necessary steps to reduce the impact of balance funds which in the short term impede economic growth, increase the effectiveness of government spending through targeting development spending and the use of the budget must be able to provide clear information, regarding the goals, objectives, results and benefits of the budget that are formulated using a performance approach that prioritizes the performance of work results from a predetermined budget or input allocation plan and continues the policy of providing opinions on Regional Government Financial Reports. If the BPK's opinion shows deviations, then it must be followed up immediately so that the regional economic development target can be achieved.