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http://dx.doi.org/10.13106/jafeb.2021.vol8.no3.0741

The Application of Optimal Control Through Fiscal Policy on Indonesian Economy  

SYAHRINI, Intan (Faculty of Mathematics and Natural Science, Universitas Syiah Kuala)
MASBAR, Raja (Faculty of Economics and Business, Universitas Syiah Kuala)
ALIASUDDIN, Aliasuddin (Faculty of Economics and Business, Universitas Syiah Kuala)
MUNZIR, Said (Faculty of Mathematics and Natural Science, Universitas Syiah Kuala)
HAZMI, Yusri (Politeknik Negeri Lhokseumawe)
Publication Information
The Journal of Asian Finance, Economics and Business / v.8, no.3, 2021 , pp. 741-750 More about this Journal
Abstract
The budget deficit is closely related to expansionary fiscal policy as a fiscal instrument to encourage economic growth. This study aims to apply optimal control theory in the Keynesian macroeconomic model for the economy, so that optimal growth can be found. Macroeconomic variables include GDP, consumption, investment, exports, imports, and budget deficit as control variables. This study uses secondary data in the form of time series, the time period 1990 to 2018. Performing optimal control will result in optimal fiscal policy. The optimal determination is done through simulation, for the period 2019-2023. The discrete optimal control problem is to minimize the objective function in the form of a quadratic function against the deviation of the state variable and control variable from the target value and the optimal value. Meanwhile, the constraint is Keynes' macroeconomic model. The results showed that the optimal value of macroeconomic variables has a deviation from the target values consisting of: consumption, investment, exports, imports, GDP, and budget deficit. The largest deviation from the average during the simulation occurs in GDP, followed by investment, exports, and the budget deficit. Meanwhile, the lowest average deviation is found in imports.
Keywords
Optimal Control; Macroeconomic Variables; Budget Deficit;
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