Foreign Investment Intervention on Economic Growth in Indonesia

Abstract

This study aims to examine and analyze foreign investment interventions on the economic growth in Indonesia. Economic growth is a vital indicator of the prosperity of a country. Intervention on foreign investment is necessary from time to time in order to ensure benefits for all parties. As a developing country, Indonesia requires substantial funds to carry out national development. The analytical method used is path analysis using secondary data. The results of this study indicate that inflation does not directly affect economic growth or indirectly through the mediation of foreign investment. Moreover, interest rates have a direct and significant negative effect on economic growth, but interest rates have a positive and significant indirect effect on economic growth through foreign investment. This study also finds that the exchange rate has no direct effect on economic growth, however the exchange rate has a negative and significant indirect effect on economic growth through foreign investment.