Abstract
Economic growth and international trade are related to one another. International trade stimulates long-term economic growth. The more trade activities in a country, the more rapid economic growth; this trade is a key component of development in a country, its contribution is felt with the increasing economic growth in several countries. The purpose of this study looks at the impact of trade openness on economic growth in Indonesia in 1986-2017. This research is a quantitative study using time series data from 1986-2017, research data obtained from the world bank, data analysis techniques using the GMM method to see the impact of trade openness on economic growth. The test results using the Generalized Method of Moments analysis method show that all variables significantly influence the dynamics of economic growth in Indonesia. This result is proven by the t-statistic probability value, which shows a smaller value compared to the t-table value. Then the value also has a probability of less than α. It can be concluded that the variables of trade, FDI, inflation, and the number of workers have a significant effect on economic growth in Indonesia.
Highlights
Each country has the advantage of having trade openness, namely gaining wide market access, achieving high efficiency and economic competitiveness in each country, and getting great opportunities for employment
The results of the analysis using the Generalized Method of Moment (GMM) method show that all variables significantly influence the dynamics of economic growth in Indonesia
GMM results for trade variables, FDI, inflation, and the number of workers show a significant influence on economic growth, where these results are indicated by probability values less than α
Summary
Each country has the advantage of having trade openness, namely gaining wide market access, achieving high efficiency and economic competitiveness in each country, and getting great opportunities for employment. Economic growth and international trade are related to one another; international trade stimulates long-term economic growth. The more trade activities in a country, the more rapid economic growth; this trade is a key component of development in a country, its contribution is felt with the increasing economic growth in several countries. There are different treatments for the country of Indonesia. Indonesia is a country with a fairly stable export value, as evidenced from 2017-2018, export growth rose by 10%, with a stable import value (Statistics Indonesia, 2019). The assumption of positive exports and stable imports in Indonesia shows the level of trade openness in Indonesia has an impact on the economy, especially economic growth, in terms of GDP
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