Analysis of the Impact of Deficit, Inflation, and Interest Rates on Economic Growth in Indonesia (1990–2023)
DOI:
https://doi.org/10.65886/ijde.v1i2.39Keywords:
Deficit, Inflation, Interest Rate, Economic Growth, COVID-19Abstract
This study discusses the Effects of Deficits, Inflation, and Interest Rates on economic growth, especially after the COVID-19 pandemic. This topic is interesting to study because it concerns the effectiveness of macroeconomic policy management in maintaining long-term growth. This study examines how the budget deficit, inflation, and interest rates affect Indonesia's long-term economic growth, particularly by comparing conditions before and after the COVID-19 pandemic. This study is new in terms of scope and depth of analysis. Few previous studies have simultaneously examined these three variables over a long period (1990–2023), especially given the differences in conditions before and after the pandemic. The method used is a quantitative approach, with an OLS regression model from 1990 to 2023, and testing classical assumptions to ensure the model's validity. Secondary data are drawn from official publications of the World Bank and the Ministry of Finance of the Republic of Indonesia. The results of the study show that the budget deficit variable has a significant positive effect, while inflation and interest rates simultaneously have a significant adverse impact on economic growth. With R-squared values of 0.8420 and 0.8202, the three variables explain economic growth firmly, though with varying influence across the periods before and after the pandemic. This finding underscores the need for synchronization between fiscal and monetary policies to maintain long-term economic stability and growth.
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