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Analyzing the determinants of growth in Indonesia : an empirical study
Economic growth has been one of the most exciting and intriguing fields of research in economics. It is a long-run macroeconomic phenomenon which is commonly believed as the key to break the puzzle of prosperity. This thesis is an effort to incorporate the growth empirics into the case of Indonesia. This thesis tries to answer four main problems: (i) What determines growth in general? (ii) Is growth regression based on worldwide observation able to display the episodes of the Indonesian stylized growth? (iii) How well does the model predict the actual values of the growth rate of Indonesia? (iv) What can be inferred from the differences in the values of projected growth rates and the values of actual ones? This thesis tries to examine and answer the research questions by conducting two approaches: (i) descriptive study, (ii) empirical study. The time frame for the analysis is 30 years: 1971-2000, which is divided into four time-series: 1971-1980, 1981-1990, 1991- 1995, and 1996-2000. The data is constructed as panel data. The construction of the growth regression models is based on neoclassical model following Barro?s regression approach. The empirical work is conducted by employing a 2-SLS with instrumental variables technique. The steps of the empirical work of this thesis is first to construct the average growth regression model. Next, using all plausible growth models, I estimate the projected growth rates for Indonesia. One novel finding of this thesis is the interaction of democracy and human capital, which is significant to growth. This thesis indicates some plausible determinants of growth: initial level of income, physical capital accumulation, human capital accumulation, openness, government size, inflation, interaction of democracy and initial level of human capital, and quality of institutions. This research finds that the Indonesian economy long-run growth is best explained by these determinants of growth: initial level of income, physical capital accumulation, human capital accumulation, and openness. This study finds that the predicted growth rates for Indonesia are understated if they are predicted by growth regression models employing worldwide data. The unexplained part of long-run growth is quite large. To narrow the gap of actual and predicted growth rates of Indonesia, I try to incorporate external shocks into the growth model. The result is better explanation of the model on shorter-run, that is the time when the shock occurs. I succeed to find empirical evidence for the existence of East Asian crisis but fail to incorporate the oil boom in the mid-70?s. However, entering external shocks into the model does not help to boost the prediction power of the models for the long-run: 1971-2000. Overall, the best growth model is able to explain 65.48% of Indonesian actual growth rates in 1971-2000. Includes tables
Ketersediaan
| Call Number | Location | Available |
|---|---|---|
| 5561 | PSB lt.2 - Karya Akhir | 1 |
| Penerbit | Jakarta Fakultas Ekonomi Universitas Indonesia., 2006 |
|---|---|
| Edisi | - |
| Subjek | Econometric models Indonesia Economic growth Economic development |
| ISBN/ISSN | - |
| Klasifikasi | - |
| Deskripsi Fisik | ix, 157 p. : chart. ; 30 cm |
| Info Detail Spesifik | - |
| Other Version/Related | Tidak tersedia versi lain |
| Lampiran Berkas | Tidak Ada Data |