Purchase Power and Consumption Pattern Change of Society (Analysis of 34 Panel Data in Indonesia)

Sri Indriyani S Dai ,Ismet Sulila

doi:10.7176/jesd/11-2-07

Abstract

Purchase power and consumption patterns change are important aspects to formulate government policies in economic development. The research objective is to analyze each the magnitude of macroeconomic variables on real household consumption of 34 provinces in Indonesia. The research method used is correlative quantitative research to explore the relationship of facts proposed and then described systematically, factually and accurately about the facts and phenomena, as well as the variables needed for public consumption. The research results show two finding. First, there is a negative and significant relationship between conversion and consumption of Indonesian. The increase in inflation will be responded by a decrease in consumption of Indonesian in 34 provinces during 2016-2018. Second, Per capita income has a negative and significant impact on consumption of Indonesian in 2016-2018. The research recommendation is to promote Indonesian consumption who moves into slowing phase due to a shifting or consumption patterns change. Keywords : Purchase Power, Consumption Pattern DOI : 10.7176/JESD/11-2-07 Publication date: January 31 st 2020

Highlights

Real household consumption expenditure is the largest component of aggregate demand, about 60% of Gross Domestic Product (GDP), and is an important variable for economic analysis (OECD, 2009)
The income will greatly affect the consumption level of people. These results indicate a weakening of purchase power among Indonesian
The increase in Gini ratio suppresses the consumption in Indonesia. f

Summary

Introduction

Real household consumption expenditure is the largest component of aggregate demand, about 60% of Gross Domestic Product (GDP), and is an important variable for economic analysis (OECD, 2009). The turbulent global economy has significant effect on Indonesia's economic growth. Viewed from the contribution growth, Indonesia's economic growth is supported by public consumption of more than 55 percent. Lower purchase power of Indonesian in 2017 became a hot issue amid the global economic slowdown. It affected Indonesia's economic growth that increased only 4.76 percent. Weakening of people's purchase power is considered a problem based on assessment and its significant contribution to Indonesian economy as a whole. Referring to Central Statistics Agency, the household consumption is more important than the combination of Gross Fixed Capital Formation, exports, import and government expenditure. The households do not directly receive contributions from redistribution of tax payments to government in process to generate and distributing income (Hronova and Hindls, 2013)

Methods

Results

Discussion

Conclusion