Abstract
Abstract Energy is an essential part of life for the global community. In 2023, Indonesia ranked 15th, up from 20th in 2005, and became the country with the largest primary energy consumption in the Southeast Asia region, reaching 185.5 million tons of oil equivalent or 1.68 percent of global consumption. Energy consumption in Indonesia continues to increase, but oil production as the main source of energy continues to decline. In addition, the government has to allocate significant energy subsidies from the government budget. If policies are not properly established, it will disrupt economic stability. Therefore, the aim of this research is to analyze the impact of energy consumption, oil production, and energy subsidies on economic growth in Indonesia from 2005 to 2023 in the short and long term. This study uses the Multiple Linear Regression method with a Vector Error Correction Model approach. The results show that in the short term, energy consumption has a positive effect on economic growth, while oil production and energy subsidies do not affect economic growth. In the long term, energy consumption and oil production have a positive impact on economic growth, while energy subsidies have a negative impact on Indonesia’s economic growth. The Impulse Response Function (IRF) results show the largest response when each variable is shocked, originating from the shock of economic growth itself. Meanwhile, the Variance Decomposition (VD) results show that the most dominant variable in explaining economic growth is economic growth itself. Other variables such as energy consumption and oil production also contribute to economic growth, while energy subsidies have a smaller contribution to economic growth.
Published Version
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