Determinants of Economic Growth in Indonesia in the Short And Long Term: An Analysis of the Islamic Human Development Index (I-HDI), External Debt, Investment, Exchange Rates, and Government Expenditure
Abstract
Indonesia’s economic growth continues to fluctuate in line with the dynamics of national development and global economic pressures. Indonesia’s economic growth is inextricably linked to various interrelated factors, both from a macroeconomic perspective and in terms of the quality of human development. This study therefore aims to analyse the determinants of economic growth in Indonesia in both the short and long term, using independent variables comprising the I-HDI, external debt, investment, the exchange rate and government expenditure for the period 1996–2025. This study employs a quantitative method with an associative research design. The sampling technique used in this study is non-probability sampling, specifically total sampling. The sample comprised 30 data points, covering the period from 1996 to 2025, in the form of secondary time-series data. Data collection was carried out using the documentation technique. Data analysis was conducted using the Autoregressive Distributed Lag (ARDL) model with the assistance of EViews 13 software. The research findings indicate that the I-HDI has a positive and significant impact on economic growth in the long term, whilst in the short term the impact remains positive but is not yet significant. External debt has been shown to have a negative and significant impact on economic growth, in both the short and long term. Investment has a positive and significant impact in the long term, whilst in the short term the impact is positive but not significant. The exchange rate has a negative and significant impact in the long term, whilst in the short term the impact is negative but not yet significant. Government expenditure, meanwhile, has a positive and significant impact on economic growth, both in the short and long term. These findings indicate that the I-HDI, investment and the exchange rate have not yet had a significant impact on economic growth in the short term. Consequently, policies and improvements in the quality of human development based on the maqashid syariah, the acceleration of productive investment, and exchange rate stability need to be strengthened so that their impact on economic growth can be felt more quickly. The Ministry of Finance can then strengthen fiscal management, whilst foreign debt should be channelled towards sectors with a high multiplier effect. Furthermore, Bank Indonesia continues to maintain the stability of the rupiah exchange rate and strengthen coordination of monetary policy. The Central Statistics Agency can also continue to improve the quality, completeness and timeliness of the economic and social statistical data required for the formulation of development policies. The Ministry of Finance can strengthen fiscal management and foreign debt management, which should be directed towards sectors with a high multiplier effect. Furthermore, Bank Indonesia continues to maintain the stability of the rupiah exchange rate and strengthen monetary policy coordination. The Central Statistics Agency can continue to improve the quality, completeness and timeliness of the economic and social statistical data required for the formulation of development policies.
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