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Journal of Regional Economics Indonesia
Published by Universitas Merdeka Malang
ISSN : -     EISSN : 27235769     DOI : 10.26905/jrei
Core Subject : Economy,
Economics, Econometrics & Finance
The Journal of Regional Economics Indonesia welcomes studies on the themes of development economics, especially those concerning four main issues, namely: (i) regional finance; (ii) banking; (iii) human resources; and (iv) regional / spatial economics. These four issues are obtained through empirical writing and ideas (literature review). The main objective is to provide a sharp analytical related to efforts to develop development economics. The objectives of the journal are expected to be able to contribute to the literature as well as practically.
Arjuna Subject : Ilmu Ekonomi, Ekonometrika dan Keuangan (semua kategori) - Ilmu Ekonomi, Ekonometrika dan Keuangan (Lain-Lain)
Articles 81 Documents
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Foreign Direct Investment, Trade Dynamics, and Economic Growth in Indonesia: Evidence from a Vector Error Correction Model Renaldi, Renaldi; Aprilia, Riska; Qodri, Lutfi Asnan
Journal of Regional Economics Indonesia Vol. 6 No. 2 (2025): Agustus 2025
Publisher : University Merdeka Malang

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.26905/jrei.v6i2.16689

Abstract

This study examines the short-run dynamics and long-run relationships between foreign direct investment (FDI), exports, imports, and economic growth in Indonesia using annual time-series data from 1990 to 2024. Employing a Vector Error Correction Model (VECM), the analysis captures both long-term equilibrium relationships and short-term adjustments among the variables. The results reveal the existence of cointegration, indicating a stable long-run relationship. Empirical findings show that, in the long run, FDI has a statistically significant negative effect on economic growth, while imports exert a positive and significant impact. Exports, however, do not demonstrate a significant effect on growth in either the short or long run. These results suggest that FDI inflows in Indonesia are largely concentrated in non-productive sectors, limiting their contribution to sustainable economic growth, whereas imports play a crucial role in supporting industrial production through capital goods and intermediate inputs. The study highlights the importance of redirecting FDI toward high-value-added sectors and maintaining strategic import policies to promote long-term economic growth.

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