The Analysis of Causality Between Foreign Direct Investment (FDI) and Economic Growth In Indonesia For The Period of 1974-2001
Abstract
Indonesia as less developed country (LDC) still needs much investment to
stimulate the economic growth.Because of the investment from domestic was
limited,then,the presenceofforeign investment was needed.It was proved that in
the beginning of developed countries' development,the presence of foreign
investment had positiveinfluenceto the economicgrowth.
The objective ofthis research is to know what the relationship betweenthe
foreign direct investment and the economic growth in Indonesia.Is there
bidirectional causality or unidirectional causality between FDI and the economic
growth? To answer this question,writer was applying the Granger causality test
combined with the Final Prediction Error by Hsio.The data used in this research
were foreign direct investment and economic growth taken from International
Financial Statistics and Bank Indonesia for the period of 1974-2001.
The result was that there was unidirectional causality from FDI to the
economic growth.It means that only FDI causes the economic growth,on the
other hand,the economic growth not causes FDI.From the result can be
concluded that the presence of FDI in Indonesia had positive influence to the
economic growth.
Collections
- Economics [2138]