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Analysis of the Relationship between Foreign Debt and Economic Growth in Indonesia using the Autoregressive Distributed Lag ARDL Model
ABSTRACT
Papilaya, Maria Elizabeth (2023) "Analysis of the Relationship Between
Foreign Debt and Economic Growth in Indonesia Using the Autoregressive
Distributed Lag (ARDL) Model". Thesis. Development Economics Study
Program. Faculty of Economics and Business. Universitas Negeri Semarang.
Advisor: Yozi Aulia Rahman, S.E. M.Sc
Keywords: Foreign Debt, Economic Growth, Private Sector, Public Sector
Foreign Debt is an important and crucial instrument in driving economic
growth in Indonesia. As a country that is still developing to become developed,
Indonesia is ranked first as a country that has the largest foreign debt among
Southeast Asian lower-middle income countries. In addition, from year to year
Indonesia tends to experience an increase in foreign debt from the public sector as
well as from the private sector. This study aims to determine and analyze the
relationship between private and public sector external debt and economic growth
in Indonesia.
The research used includes quantitative research using data from the
country of Indonesia and data from 1980 - 2021. The analysis method used in the
study, namely Autoregressive Distributed Lag (ARDL) analysis using Eviews10
software. The data obtained is secondary data from WorldBank and the Global
Debt Database by the IMF.
The results of this study explain that there is one way causality between
the private and public sector external debt variables and economic growth in
Indonesia. Then, the Autoregressive Distributed Lag (ARDL) model estimation
results show that the private and public sector external debt variables have a
significant effect in the short-run and also long-run on economic growth. This
indicates that any increase in economic growth is a response by a fluctuation in
public sector debt and in the private foreign debt sector. The implication is that
Indonesia's economic growth also comes directly from the role of foreign debt,
both from public and private sector foreign debt.
The suggestion in this study is that it is important for the government to
maintain strict control over the private sector and the public sector in relation to
foreign debt management. The private sector and the government also need to
manage the risks associated with foreign debt by using it in the long term so that it
does not burden it again in the future
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