Affiliation:
1. University of Nigeria, Nsukka, Nigeria
Abstract
The relationship between finance and economic development in Indonesia was assessed from 1980 to 2019 using the generalized least model. Indonesia witnessed significant improvement in the financial system and infrastructure, but this was not translated into development. Conventionally, the negative and nonsignificant relationship between the financial development index (FDI) and the human development index (HDI) and positive and nonsignificant relationship between FDI and gross fixed capital formation (GFCF). Private consumption (PRC) and GFCF/HDI revealed positive and statistically significant. Government capital expenditure (GCE) and external reserve (EXR) depict a negative and significant relationship on HDI and GFCF, respectively. A standardized corporate social responsibility was administered to financial institutions and markets to promote social welfare, and the introduction of special credit allocation was to fund infrastructural gaps and adequately monitor the special allocation fund projects. Regulation of luxuries via fiscal policy promote local production/consumption.
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