Journal of Applied Research in Economics and Business

The Impact of Inflation, Interest Rates, and Exchange Rates on Economic Growth in Indonesia

Fri, 01 May 2026 00:00:00 +0700

This study examines the impact of inflation, interest rates, and exchange rates on Indonesia’s economic growth using annual time-series data from 2000-2023. The purpose of this research is to analyze whether these key macroeconomic variables significantly influence GDP growth and to determine which factor contributes most to economic fluctuations in Indonesia. The analysis employs the Ordinary Least Squares (OLS) method. The regression results show that inflation has a negative and significant effect on economic growth, indicating that rising price levels reduce purchasing power and weaken economic performance. Interest rates also display a negative and significant relationship with growth, suggesting that higher borrowing costs suppress investment and consumption. Meanwhile, the exchange rate has a negative and significant impact, implying that currency depreciation increases production costs and disrupts economic activity. The findings highlight that macroeconomic instability particularly high inflation, elevated interest rates, and exchange rate depreciation tends to reduce Indonesia’s economic growth. These results emphasize the importance of maintaining price stability, supporting investment-friendly interest rate policies, and ensuring exchange rate stability to strengthen long-term economic performance.

Examining The Relationship Between Money Supply and Banking Credit on Interest Rate Fluctuation

Rizky Al Fajri Raharja, Alfi Syahrin, Ade Kurnia, Zia Thahira, Nur Aidar — Fri, 01 May 2026 00:00:00 +0700

This study examines the relationship between money supply, banking credit, and interest rate fluctuations in Indonesia, an economy characterized by a bank-based financial system. The interaction between monetary policy, money supply, and bank credit plays a critical role in influencing interest rates, which in turn affect the broader economy. Using data from 2010 to 2024, the research applies an econometric approach based on the Autoregressive Distributed Lag (ARDL) model to analyze the short-term and long-term dynamics between these variables. The findings suggest that interest rate fluctuations are significantly influenced by bank credit, while the effects of money supply are less pronounced in the short run. The study contributes to understanding the mechanisms through which monetary policy affects the economy and offers insights for policymakers in Indonesia, particularly in maintaining monetary and financial stability.

Interest Rates and Money Supply: Implications for Price Stability in Indonesia

Fri, 01 May 2026 00:00:00 +0700

This study examines the influence of monetary policy represented by interest rates (BI7DRR) and money supply (M2) on price stability (inflation) in Indonesia from 2015 to 2024 using the Autoregressive Distributed Lag (ARDL) approach. Monthly data from Bank Indonesia and Statistics Indonesia were analyzed using the ARDL. The empirical results indicate that neither interest rates nor money supply have a statistically significant short-term effect on inflation at the 5% level. Inflation dynamics are instead strongly dominated by past inflation, as indicated by the highly significant coefficient of the lagged inflation variable. These findings suggest that short-term inflation in Indonesia is primarily driven by its own persistence rather than by monetary policy instruments. Diagnostic tests confirm that the model satisfies classical assumptions, with no evidence of autocorrelation, heteroscedasticity, or non-normality in the residuals. The results highlight the importance of managing inflation expectations and addressing structural factors beyond monetary aggregates and policy rates for achieving effective price stability in Indonesia.

The Impact of GDP Growth, Foreign Direct Investment, and the Real Exchange Rate on Imports of Goods and Services in ASEAN-3 Countries

Fri, 01 May 2026 00:00:00 +0700

This study examines the long-run and short-run effects of real GDP growth, foreign direct investment, and the real exchange rate on imports of goods and services in three ASEAN economies Indonesia, Malaysia, and Thailand using annual panel data from 1990 to 2024. The analysis employs the Panel ARDL Pooled Mean Group (PMG) estimator to capture dynamic adjustments across countries with different short-run structures. Unit root tests confirm that the variables are integrated of mixed orders, I(0) and I(1), supporting the use of the ARDL framework. Cointegration tests indicate a stable long-run relationship among the variables, suggesting that import behavior is driven by fundamental macroeconomic factors. The long-run results show that only the real exchange rate significantly influences imports, with appreciation reducing import demand, while GDP growth and FDI exhibit no significant long-run effects. In the short run, GDP growth significantly increases imports, whereas the exchange rate and the error-correction term are insignificant. Overall, the findings highlight the dominant role of exchange rate competitiveness in the long-run import dynamics of ASEAN-3 countries, while economic growth primarily affects short-run fluctuations. These results provide important policy implications for exchange rate management and trade stabilization strategies.

The Effect of Unemployment, Real Exchange Rates, Domestic Credit, and Foreign direct investment on Economic Growth in ASEAN-5

Humaira Zuhra, Regada Agra, Nida Nida, Faizah Amalina, Taufiq C. Dawood — Fri, 01 May 2026 00:00:00 +0700

This study investigates the effect of unemployment, real exchange rates, domestic credit, and foreign direct investment (FDI) on economic growth in five ASEAN countries Indonesia, Myanmar, Thailand, the Philippines, and Vietnam during the period 2000 to 2024. Using annual data from the World Bank’s World Development Indicators (WDI), the study applies a Panel Autoregressive Distributed Lag (Panel ARDL) model under the Pooled Mean Group (PMG) estimator to analyze both long-run and short-run relationships among the variables. The findings reveal that, in the long run, the real exchange rate and domestic credit exert significant negative effects on economic growth, suggesting that excessive exchange rate volatility and inefficient credit allocation hinder economic performance. Conversely, unemployment and FDI show statistically insignificant effects, indicating that labor market inefficiencies and foreign investment inflows have not yet translated into consistent growth benefits across ASEAN economies. In the short run, the error correction term is negative and significant, confirming a strong adjustment toward equilibrium, while unemployment fluctuations have a substantial short-term impact on output. The results imply that exchange rate stability, efficient credit management, and improved labor market conditions are essential for sustaining long-term economic growth in ASEAN-5 countries.

The Effect of Inflation, Investment, and Unemployment on Economic Growth in Indonesia

Fri, 01 May 2026 00:00:00 +0700

This study aims to analyze the influence of inflation, investment, and unemployment on economic growth in Indonesia during the period 2005–2024. The study uses a quantitative approach with multiple linear regression methods. Secondary data were obtained from the Central Statistics Agency (BPS), Bank Indonesia, and other relevant agencies. The estimation results show that inflation and investment have a positive and significant effect on economic growth, while unemployment has a significant negative effect on Gross Domestic Product (GDP). The coefficient of determination (R²) value of 0.9857 indicates that variations in economic growth can be strongly explained by these three independent variables. Simultaneously, inflation, investment, and unemployment have been shown to have a significant effect on Indonesia's economic growth. These findings emphasize the importance of price stability, improving investment quality, and reducing unemployment as strategic steps to strengthen national economic growth.

Revisiting the Government Expenditure–Growth Nexus in Asia: Evidence from Panel Cointegration and Granger Causality

Fri, 01 May 2026 00:00:00 +0700

This study re-examines the long-run relationship between government expenditure and economic growth in nine Asian countries, namely Singapore, Malaysia, Thailand, South Korea, Japan, China, Sri Lanka, India, and Bhutan, over the period 2000–2023. Using a balanced panel of 216 observations, the study applies panel unit root, cointegration, random-effects, and Granger causality techniques to examine the magnitude and direction of the government expenditure and growth nexus. The Levin–Lin–Chu and Im–Pesaran–Shin tests indicate that the variables are integrated of order one, while the Pedroni and Kao tests confirm a long-run cointegrating relationship. The estimated long-run results show that government expenditure has a positive and statistically significant effect on economic growth, with an elasticity of 0.51 after controlling for gross fixed capital formation, trade openness, and inflation. Gross fixed capital formation and trade openness also contribute positively to growth, whereas inflation negatively affects economic performance. The Granger causality analysis reveals a bidirectional relationship between government expenditure and economic growth, supporting both the Keynesian hypothesis and Wagner’s Law. The findings imply that fiscal policy remains important for sustaining growth, although spending quality and macroeconomic stability are equally essential.

Econometric Analysis of Changes in Generation Z Consumption Patterns and Their Implications for Market Dynamics and Economic Growth in Indonesia

Fri, 01 May 2026 00:00:00 +0700

This study aims to analyze changes in the consumption patterns of Generation Z in Indonesia and examine their implications for market dynamics and national economic growth through an econometric approach. Generation Z, as a group of digital-native consumers, shows different consumption preferences from previous generations, especially in terms of technology, sustainability, and the social value of a product. The data used in this study is sourced from the National Socioeconomic Survey (Susenas), Bank Indonesia Consumer Survey, and BPS macroeconomic data for the period 2010–2024. The econometric model used is Panel Data Regression (Fixed Effect Model) with the dependent variable being Generation Z's per capita consumption expenditure, while the independent variables include income, digital expenditure, inflation, and consumer confidence index. The results show that income and digital expenditure have a significant positive effect on Generation Z's consumption, while inflation has a significant negative effect. These findings confirm that changes in Generation Z's consumption patterns are driving market transformation towards a digital economy, which has implications for the growth of the service and technology sectors in Indonesia. which analyzes changes in Generation Z's consumption patterns in Indonesia by combining a literature and econometric approach. Time series data from 2010–2023 was used to test the effect of per capita GDP, inflation, and Gen Z population on their consumption. Regression results show that GDP per capita has a positive but insignificant effect, inflation has a significant positive effect, and Gen Z population has a significant positive effect. These findings confirm that, in addition to macroeconomic factors, Gen Z's unique digital-based consumption behavior creates new dynamics in the Indonesian market.

Monetary Influences on Economic Growth: Evidence from Five Asian Countries

Fri, 01 May 2026 00:00:00 +0700

This study investigates the impact of monetary policy on economic growth in five Asian countries Indonesia, India, South Korea, Thailand, and Vietnam using annual data from 2000 to 2024. The analysis employs a panel Autoregressive Distributed Lag (ARDL) model to examine both short-run and long-run relationships between key monetary indicators and GDP growth. The independent variables include real interest rate, real effective exchange rate, money supply (M2), and inflation, while GDP growth represents economic performance. The results reveal that, in the long run, real interest rate and exchange rate have negative and significant effects on economic growth. Higher interest rates and currency depreciation tend to suppress investment and production. Money supply and inflation show no significant long-term influence, indicating that liquidity expansion and price changes have limited structural effects on growth in these economies. The short-run error correction coefficient is negative and significant, implying a rapid adjustment toward equilibrium after economic shocks. The findings suggest that stable monetary management particularly interest rate and exchange rate policies is crucial to support sustainable growth in Asian economies.

A Hypothetical Analysis of Expenditure Components on The GDRP Growth of Medan City Before and After the Pandemic: A Keynesian Conceptual Approach

Fri, 01 May 2026 00:00:00 +0700

This study examines the relationship between aggregate expenditure components and the growth of the Gross Regional Domestic Product (GRDP) of Medan City during the 2010–2024 period through the lens of Keynesian theory. The COVID-19 pandemic fundamentally altered the structure of the regional economy, necessitating a comparative analysis of the expenditure components before and after the pandemic. A quantitative method using multiple linear regression on time-series data was applied. The results indicate a high predictive power of the model (R² = 0.990). Household consumption (β = 0.530; p < 0.001), gross fixed capital formation (β = 0.254; p = 0.020), and net export (β = 0.026; p = 0.001) were found to have a significantly positive effect on GRDP growth. Conversely, government consumption, non-profit institutions’ consumption, and inventory changes showed no significant impact. These findings confirm the Keynesian proposition that aggregate demand components are the primary determinants of regional economic output. Policy implications suggest that stimulating household consumption and infrastructure investment constitutes the most effective strategy to accelerate Medan City’s economic growth in the post-pandemic period.

The Impact of Fiscal Policy on Economic Growth in Indonesia

Fri, 01 May 2026 00:00:00 +0700

This paper examines the impact of fiscal policy on economic growth in Indonesia. Fiscal policy, which includes government spending and taxation, plays a crucial role in influencing macroeconomic performance and development outcomes. This tudy uses a descriptive qualitative approach supported by secondary data and relevant literature, this study explores how fiscal instruments such as taxation, government spending, budget deficits, and intergovernmental transfers affect Gross Domestic Product (GDP), employment, and public welfare. The findings show that productive government spending, especially in infrastructure development, education, health, and social protection programs, has a positive contribution to economic growth and economic stability. However, the effectiveness of fiscal policy in Indonesia is still constrained by challenges such as inefficient budget allocation, fiscal deficits, dependence on public debt, and regional inequality. Therefore, strengthening fiscal governance, improving budget efficiency, and enhancing policy coordination are essential to support sustainable and inclusive economic growth in Indonesia.

Does the Human Development Index and Poverty Influence Economic Growth in Indonesia? A Panel Approach

Fri, 01 May 2026 00:00:00 +0700

Economic growth is a crucial component in assessing the success of a country's development, especially for developing countries such as Indonesia. This study investigates the causal relationship between the Human Development Index (HDI), the number of poor people, and Indonesia's economic growth for the 2020–2024 period. We used panel data covering the relevant variables obtained from the Central Statistics Agency (BPS). Our results show that the HDI has a positive and significant effect on economic growth, while the number of poor people has no significant effect. These findings indicate that improving the quality of human resources is essential for promoting sustainable economic growth in Indonesia.

The Impact of Money Supply (M2) and Inflation on BI Rate Indonesia

Fri, 01 May 2026 00:00:00 +0700

This study explores the impact of money supply (M2) and inflation on the reference interest rate set by Bank Indonesia within the context of the country’s monetary policy framework. A quantitative approach was utilized, employing multiple linear regression analysis on time series data spanning from January 2015 to December 2024. The study assesses both the individual and joint effects of these key macroeconomic variables. Data were obtained from official reports published by Bank Indonesia along with the Central Statistics Agency (BPS), then analyzed using the EViews 12 software. The empirical results reveal that inflation exerts a positive and a notable statistical influence on the BI Rate, with a regression coefficient of 0.452 and a probability value of 0.0000 (<0.05). In contrast, the money supply (M2) displays a negative yet statistically insignificant relationship with the BI Rate, indicated by a coefficient of -0.304 and a probability of 0.4777 (>0.05). The simultaneous testing results further demonstrate that both variables jointly exert a significant influence on the BI Rate, as shown by the F-test with a probability value of 0.0000. Furthermore, the coefficient of determination (R²) of 0.337 implies that M2 and inflation collectively account for approximately 33.7% of the variation in the BI Rate, while the remaining 66.3% is attributed to other determinants not captured in this model.

The Impact of Digital Payments on Economic Growth in Indonesia

Fri, 01 May 2026 00:00:00 +0700

Technology facilitates transactions through modern payment instruments. Digital financial inclusion enables easier and more efficient access to financial services for all groups, so that the benefits of economic development can be more evenly distributed. With fast, secure, and efficient services, digital payments promote economic efficiency, financial inclusion, and economic growth. This study aims to analyze the impact of digital payments on economic growth in Indonesia. The data used is from 2020 to 2024, covering 34 regions in Indonesia. The data was obtained from Bank Indonesia and the Central Statistics Agency using a panel data regression research method that calculates gross domestic product (GDP), the number of cards/instruments, and the unemployment rate. The results show that digital payment transactions have a positive impact on economic growth, while the unemployment rate has a negative impact. These findings confirm the importance of digital payment transaction systems as one of the drivers of sustainable economic growth in Indonesia.