The Impact of Macroeconomic Variables on the Real Economic Growth in Indonesia

Abstract

This study empirically examines and analyzes the impact of several macroeconomic indicators on economic growth, namely the extent to which the variables of poverty, human development index (HDI), foreign direct (FDI) and domestic investments (DMI) affect gross regional domestic product (GRDP) at constant prices in 2010 according to expenditure in Indonesia. By using panel data regression and data sourced from 32 provinces throughout Indonesia, the results show that poverty has a negative but not significant effect, FDI has a positive and significant effect, and HDI has a positive and significant effect. On the other hand, Domestic Investment has a positive but not significant effect on GRDP. In an effort to increase the value of GRDP, HDI, and investment (FDI and HDI) that can reduce poverty, the government, the private sector, and the community play an active role in cooperating in planning and implementing effective and efficient strategic program activities, including maintaining social security stability and politics, sustainable reform in all sectors by encouraging the use of domestic products, empowering elements of society including Micro, Small and Medium Enterprises, facilitating various vocational skills training for productive workers and drafting investment-friendly licensing governance regulations. The development of human resources must accompany economic development to reduce the negative impact of economic growth.