Effect of Investment-Savings Gap, Financial Development, and Government Fiscal Performance on Economic Growth in Indonesia

Abstract

Developing countries including Indonesia, generally still have limited capital to realize the development and increase econom ic growth. The amount of savings that is not balanced with the investment activity plan (saving investment gap) causes the investment implementation activities do not go according to plan. The gap between savings and investment can then be closed by the influx of funds from abroad. One alternative development financing through foreign debt. This study aims to analyze the effect of saving-investment gap variables, foreign debt and government expenditure on economic growth in Indonesia in 2004. Q1 - 2017.Q4. The method used in this study is the Error Correction Model (ECM) method. Based on the results of the analysis of the test show that in the short term the s aving-investment variable gap, foreign debt, and government expenditure have a positive influence on economic growth in Indonesia but are not significant. While the estimation results, in the long run, show different results where saving-investment gap variables and government expenditure have a positive and significant effect on economic growth in Indonesia, and foreign debt variables have a negative and significant influence on economic growth Indonesia.