Is the Digital Economy Driving the Economic Growth of the Sumatra Region During the Pandemic?

Adhitya Wardhono (Department of Economics, Faculty of Economics and Business, Universitas Jember, East Java)
M. Abd. Nasir (Department of Economics, Faculty of Economics and Business, Universitas Jember, East Java)
Ariz Aprilia (Research Fellow in Academy of Macroeconomics Monetary and Market, Bank Indonesia Institute, Jakarta Capital Special Region)
Panji Tirta Nirwana Putra (The Prakarsa, Jakarta Capital Special Region)
Ben Hansel N. Zebua (Department of Governmental Science, Faculty of Social Science and Political Science, Universitas Riau, Riau)

Journal of Economics Research and Social Sciences
Vol 6, No 1: February 2022

Digitalization has an essential role during the pandemic because it helps facilitate various economic activities. This study aims to analyze the economic digitization of financial technology on economic growth in the Sumatra region (North Sumatra, West Sumatra, and South Sumatra) in January 2020-June 2021. We also used macroeconomic indicators in the form of inflation, foreign direct investment (FDI), and domestic investment (DI) as a control to explain economic conditions. The analysis results using the Panel Vector Autoregression (P-VAR) showed that fintech contributed positively to economic growth. This result was supported by maintained inflation stability that created a conducive investment climate, thereby attracting FDI. We recommend that the regional government take advantage of existing fintech and that "prudent" policies on inflation management must always be adequately prioritized to support the acceleration of economic growth in the Sumatra region, especially North Sumatra, West Sumatra, and South Sumatra.