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Effect of Fiscal Policy and Trade Openness on Economic Growth in Indonesia: 1990-2015

Nursini Nursini
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Nursini Nursini: Department of Economics, Hasanuddin University, Makassar South Sulawesi, Indonesia.

International Journal of Economics and Financial Issues, 2017, vol. 7, issue 1, 358-364

Abstract: This study examines empirically the effect of fiscal policy and trade openness on economic growth in Indonesia for the period 1990-2015. Fiscal policy includes government spending on infrastructures, human resources, and routine spending, while tax revenue and foreign loans is as source of financing. This study finds government spending on infrastructure and human resources have positive and significant effect on economic growth if they are financed by tax revenue and insignificant if they are financed by foreign loans. Routine government spending has negative and insignificant effect on economic growth for both financed by taxes and foreign loans. Trade openness has positive and significant effect on economic growth. The implication is the proportion of spending on infrastructure and human resources should be increased by taxes financing rather than foreign loans. Competitiveness of domestic industries should be improved to achieve a positive impact of free trade.

Keywords: Fiscal; Trade Openness; Economic Growth (search for similar items in EconPapers)
JEL-codes: E62 F13 F41 H5 H6 (search for similar items in EconPapers)
Date: 2017
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