Effect of Yield Spreads (State Bonds) on Economic Growth Performance in Indonesia

Kristian Chandra, Wahyuni Rusliyana Sari (), Dwi Yantik Sriwulan and Muhammad Raditya Adhimukti
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Kristian Chandra: Faculty of Economics and Business, Universitas Trisakti, Jakarta 11440, Indonesia
Wahyuni Rusliyana Sari: Faculty of Economics and Business, Universitas Trisakti, Jakarta 11440, Indonesia
Dwi Yantik Sriwulan: Faculty of Economics and Business, Universitas Trisakti, Jakarta 11440, Indonesia
Muhammad Raditya Adhimukti: Faculty of Economics and Business, Universitas Trisakti, Jakarta 11440, Indonesia

JRFM, 2023, vol. 16, issue 3, 1-10

Abstract: This research analyzes the effect of the government bond yield curve spread on economic growth performance in Indonesia using the indicators of exchange rate, inflation, BI rate, foreign investment, portfolio investment, current account, and government accounts. Furthermore, it aims to prove the accuracy of the vector autoregression (VAR) or vector autoregression model in predicting economic growth from Q1 2010 to Q3 2020. The results showed that the yield curve spread has a significant effect on economic growth. Meanwhile, the exchange rate, inflation, and the BI rate have a negative effect on economic growth. Capital inflows such as foreign direct investment, portfolio investment, as well as the current account balance and government balance have a positive effect on economic growth. These results are useful to government policymakers, fund managers, and investors, as they provide further evidence of the potential use of yield curves as an indicator of future economic activity.

Keywords: spread yield curve; economic growth; exchange rate; inflation; BI rate; foreign direct investment; portfolio investment; current account balance; government balance; VAR (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2023
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