The Comparation of Foreign Financial Investment and Human Investment Effect on Economic in Indonesia Base on Macro Economic Point of View

Abstract

The purpose of this study is to compare the impact of the direction of the relationship between education and health investment with economic growth in Indonesia, with the impact and direction of the relationship of foreign direct investment and portfolio investment with economic growth in Indonesia. This study uses a quantitative method using the Threshold Autoregressive model. This study uses secondary data from the world bank in the annual time period from 2000 to 2019. We found that Investment in education and health has an impact on increasing productivity which drives economic growth because labor productivity directly drives the real sector. However, FDI and FPI changed the financial position in terms of capital. Direct investment increases real capital which has an impact on the creation of new sources of economic production but has consequences in the form of income transfers abroad, resulting in cash outflows. The existence of these foreign transfers continuously when economic conditions are stable and the real sector grows and generates profits that can be greater than the cash inflows obtained when foreign direct investments are made.