Abstract
This study aims to analyze the correlation between the Indonesia Composite Index (ICI) and Economic Growth in Indonesia. This study uses time series data for the period 2001 – 2018, the secondary data have been obtained from the Indonesian Central Statistics Agency and Bank Indonesia (BI). The data analysis method uses “Two stage lest square simultaneous equation model” to explain the reciprocal correclation between the Indonesian Composite Index (ICI) and economic growth, Gross Domestic Product (GDP) in Indonesia. The analysis shows that both variables have a positive and significant feedback effect in the long term. Keywords: Indonesia Composite Index, Economic Growth, Two stage lest square DOI: 10.7176/EJBM/12-8-07 Publication date: March 31 st 2020
Highlights
Economic growth has an important development role to be a main indicator in assessing the welfare of a country
Rapid Gross Domestic Product (GDP) growth brings an indication of economic growth in a country
4.3 Effect of Indonesian Composite Index (ICI) and Foreign Investment (FI) on GDP The test result shows a significance level at alpha 1%. It means that ICI has a positive and significant effect on GDP, because GDP growth has an influence on investor expectations so that it affects the movement of stock price indices
Summary
Economic growth has an important development role to be a main indicator in assessing the welfare of a country. Sukumar (2017) has stated that the capital market plays a role in promoting economic development, there is no standard mapping of the correlation between the two Based on this explanation, it is necessary to conduct more in-depth research to explain the correlation between the Stock Market represented by the Indonesian Composite Index and Economic Growth in Indonesia. A good response to investments in the capital market is reflected through a significant rate of return on investment This signal attracts more investors and will certainly expand the scope of economic activity which will increase economic growth. It is used to analyze the correlation between GDP, ICI and FI
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