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The Impact of Government’s Foreign Debt on Fiscal Sustainability of Indonesia

Yohanes Maria Vianey Mudayen
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Yohanes Maria Vianey Mudayen: Department of Economic Education, Universitas Sanata Dharma Yogyakarta, Indonesia.

International Journal of Economics and Financial Issues, 2017, vol. 7, issue 3, 746-751

Abstract: The aim of the research is to analyze the impact of government’s foreign debt on fiscal sustainability (FS) of Indonesia in 1979-2016. The model used in this research is a simultaneous equation model with the method of two stage least square. The simultaneous equation model regression results indicate that government foreign debt, FS which derives from the reduced-form equation and primary balance has a significant impact on the growth of economy in Indonesia positively. Government foreign debt lag and interest rate of Central Bank of Indonesia have a negative impact and it is significant toward the FS of Indonesia. However, the economic growth which comes from reduced form affect positively and have a significant impact on the FS of Indonesia.

Keywords: Government Debt; Economic Growth; Fiscal Sustainability; The Model Simultaneously (search for similar items in EconPapers)
JEL-codes: E62 F34 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eco:journ1:2017-03-95