The Relationship between Economic Growth, FDI, Trade, Labour, and Capital Formation in Indonesia

Budiharto, Amelia and Suyanto, Suyanto and Pratono, Aluisius Hery (2017) The Relationship between Economic Growth, FDI, Trade, Labour, and Capital Formation in Indonesia. In: The 2017 Mulawarman international conference on economics and business, 18-19 Oktober 2017, Balikpapan. (In Press)

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This paper examines the relationship between foreign direct investment, trade, labor, capital formation and economic growth in Indonesia. We use annual time series data covering period of 1985-2015 and examine using autoregressive distributed lag (ARDL). The ARDL bound test for cointegration reveals that there are three proposed model of cointegration among variables specifically when direct investment, trade, and capital formation as dependent variables. The long-run effect comes from at least two important variables affecting each relationship. Evidence of convergence to long-run equilibrium is found in the three models. Labors are found to be an important factor attracting foreign direct investment and improving production scales for trade activities. It is also found that foreign direct investment is the main contributor in capital formation injection. The study suggests that the policy and government efforts to build competent human capital as preparation for future generation is widely believe as a wise option. Continuing policies to attack foreign direct investment would promote further Indonesian economic growth. Simultaneously, the technological spillovers derive drom FDI can be absorp and adopt by the local labor force.

Item Type: Conference or Workshop Item (Paper)
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Business and Economic > Department of Economic
Depositing User: Suyanto 3198
Date Deposited: 08 Jan 2018 08:12
Last Modified: 13 Mar 2020 05:33

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