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http://dx.doi.org/10.13106/jafeb.2020.vol7.no11.127

Do Real Interest Rate, Gross Domestic Savings and Net Exports Matter in Economic Growth? Evidence from Indonesia  

SUJIANTO, Agus Eko (Faculty of Islamic Economics and Business, Institut Agama Islam Negeri Tulungagung)
PANTAS, Pribawa E. (Faculty of Islamic Studies, Universitas Ahmad Dahlan Yogyakarta)
MASHUDI, Mashudi (Faculty of Islamic Economics and Business, Institut Agama Islam Negeri Tulungagung)
PAMBUDI, Dwi Santosa (Faculty of Islamic Studies, Universitas Ahmad Dahlan Yogyakarta)
NARMADITYA, Bagus Shandy (Faculty of Economics, Universitas Negeri Malang)
Publication Information
The Journal of Asian Finance, Economics and Business / v.7, no.11, 2020 , pp. 127-135 More about this Journal
Abstract
This study aims to measure the effects of real interest rate (RIR), gross domestic savings (GDS), and net exports (EN) shocks on Indonesia's economic growth (EG). The focus on Indonesia is unique due to the abundant resources available in the nation, but they are unsuccessful in boosting economic growth. This study applied a quantitative method to comprehensively analyze the correlation between variables by employing Vector Autoregression Model (VAR) combined with Vector Error Correction Model (VECM). Various procedures are preformed: Augmented Dickey-Fuller test (ADF), Optimum Lag Test, Johansen Cointegration Test, Granger Causality Test, as well as Impulse Response Function (IRF) and Error Variance Decomposition Analysis (FEVD). The data were collected from the World Bank and the Asian Development Bank from 1986 to 2017. The findings of the study indicated that economic growth responded positively to real interest rate shocks, which implies that when the real interest rate experiences a shock (increase), the economy will be inclined to growth. While, economic growth responded negatively to gross domestic savings and net export shocks. Policymakers are expected to consider several matters, particularly the economic conditions at the time of formulating policy, so that the prediction effectiveness of a policy can be appropriately assessed.
Keywords
Economic Growth; Net Exports; Economic Education; Gross Domestic Savings; Real Interest Rate;
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