Determinants of Regional Household Final Consumption Expenditure in Indonesia

Sugiarto Sugiarto,Wisnu Wibowo

doi:10.15294/jejak.v13i2.25736

Abstract

The Indonesian economy, both at the national and regional levels, tended to experience a slowdown during 2010-2019. From the demand side, household final consumption expenditure (HFCE) is the primary cause of the slowdown. Therefore, various efforts are needed to maintain and improve HFCE. One of these efforts is to keep the stability of the macroeconomic factors that influence it. This research aims to reveal the determinants of regional HFCE in Indonesia. The determinants of HFCE were investigated using a dynamic panel data regression model with the first-difference Generalized Method of Moments (FD-GMM) approach and applied to data from 33 provinces during 2010-2019. The application of FD-GMM provides valid and consistent estimates. The results of the parameter significance test provide evidence that the lagged real HFCE, real gross regional domestic product (GRDP), and government spending have a significant positive impact on real HFCE. Meanwhile, both the inflation and unemployment rates had significantly negatively impacted. Thus, the role of policymakers in maintaining the stability of the five macroeconomic factors is necessary so that HFCE increases and the economy can grow even higher.

Highlights

The Indonesian economy during 20102019 experienced turmoil, even tending to show a slowing trend
The economy is slowing down due to many factors, one of which is a slowdown in household final consumption expenditure (HFCE)
The better quality and quantity of infrastructure in Java have accelerated the distribution of goods and services from producers to consumers

Summary

Introduction

The Indonesian economy during 20102019 experienced turmoil, even tending to show a slowing trend. Data from the Central Statistics Agency (BPS) revealed that economic growth in 2011 was 6.17%. This figure is experiencing a slowdown until 2015 (4.88%). The economy started to improve in 2016 but worsened again in 2019. The economy is slowing down due to many factors, one of which is a slowdown in household final consumption expenditure (HFCE). Economic and HFCE growth have generally taken the same direction from 2012-2019.

Objectives

Methods

Results

Conclusion