An Analysis of the Effect of Consumption Spending and Investment on Indonesia’s Economic Growth


1 Department of Economics, Faculty of Economics and Business, Universitas Halu Oleo, Kendari, Indonesia

2 Department of Mathematics, Faculty of Math and Science, Universitas Halu Oleu, Kendari, Indonesia

3 Department of Economics, Faculty of Economics and Business, Universitas Halu Oleo, Kendari 93232, Indonesia


This study aims to examine the effect of investment and consumption spending on Indonesia’s economic growth. The data used is the quarterly time series data from the first quarter of year 2003 to the fourth quarter of year 2013, comprising consumption spending, investment and economic growth. For the purpose of analysis, the autoregressive distributed lag (ARDL) model is used. The result of the study reveals that there are long-run and short-run effects of consumption spending on economic growth. Meanwhile, the effect of investment on economic growth is not significant. The study also reveals that the increase in government spending on economic growth is 1.88% if the consumption spending rises by 1%.


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