The effect of fiscal decentralization and monetary policy on economic resilience in Indonesia: a panel data

Syahrimi, Anna Yulianita and Ariodillah Hidayat
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Syahrimi: Faculty of Economics, Sriwijaya University, Indonesia
Anna Yulianita: Faculty of Economics, Sriwijaya University, Indonesia
Ariodillah Hidayat: Faculty of Economics, Sriwijaya University, Indonesia

Theoretical and Applied Economics, 2025, vol. XXXII, issue 3(644), Autumn, 101-122

Abstract: Resilience and stability of domestic economic growth on the island of Sumatra requires a collaborative combination of monetary policy and fiscal decentralization amidst the current situation of global economic slowdown, with money circulation as a proxy for monetary policy and government, regional and regional spending. Tax revenues and the Fiscal Independence Index as a proxy for fiscal decentralization policy and the Gini Index. as a moderating variable for inflation and local tax revenues. By using vector error correction model (VECM) analysis tools, Granger causality and cointegration. The test results show that in the long-term period there is a short-term to long-term model adjustment correction vector of 0.01348, which means 0.01348 percent of the regularity of the previous period and replaces the role of other variables in economic growth. In the short term, the money supply and the Fiscal Independence Index have a significant influence on economic growth.

Keywords: economic growth; monetary policy; decentralization fiscal policy; vector error correction model. (search for similar items in EconPapers)
Date: 2025
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