The Mediating Role of Investment on Economic Growth Determinants in Indonesia: An Empirical Analysis

Abdul Hamid Paddu (), Indraswati Tri Abdi Reviane, Nur Dwiana Sari Saudi, Fitriwati Djam’an, Mirzalina Zaenal and Muhammad Jibril Tajibu
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Abdul Hamid Paddu: Hasanuddin University
Indraswati Tri Abdi Reviane: Hasanuddin University
Nur Dwiana Sari Saudi: Hasanuddin University
Fitriwati Djam’an: Hasanuddin University
Mirzalina Zaenal: Hasanuddin University
Muhammad Jibril Tajibu: Hasanuddin University

A chapter in Proceedings of the 9th International Conference on Accounting, Management, and Economics 2024 (ICAME 2024), 2025, pp 2707-2715 from Springer

Abstract: Abstract Indonesia’s economic growth has been inconsistent, with various macroeconomic factors influencing its trajectory. The role of investment as a mediator in this process remains unclear. This study aims to examine the mediating effect of investment on the relationship between key macroeconomic variables (exchange rate, inflation, and interest rate gap) and economic growth in Indonesia. Using time series data from 2002 to 2021, this study employs multiple linear regression analysis with the Least Squares (LS) model. The mediating role of investment is tested using Baron and Kenny’s (1986) approach. The findings reveal that (1) exchange rate has a significant positive effect on investment; (2) inflation negatively impacts investment; (3) the interest rate gap positively influences investment. However, investment does not significantly mediate the relationship between these variables and economic growth. While macroeconomic factors significantly influence investment in Indonesia, the mediating role of investment in driving economic growth is not substantiated. This suggests the need for a more nuanced understanding of growth determinants in the Indonesian context.

Keywords: Economic Growth; Investment; Exchange Rate; Inflation; Interest Rate Gap (search for similar items in EconPapers)
JEL-codes: E22 F43 O11 O47 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-758-8_219

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DOI: 10.2991/978-94-6463-758-8_219

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