Impact of Consumption, Credit and Capital Formation on Economic Growth in Indonesia

English

Abstract

Economic growth theory has a lot of thoughts and debates in economic literature. Public opinion states that the drivers of economic growth are labor, availability of capital, and natural resources. One of the thoughts that have become a phenomenon in the theory of economic growth is the Keynesian theory which assumes that consumption, investment, and government spending can drive economic growth. Classical and Neo-Classical views that disagree with Keynesian thought oppose government interference. They think that government intervention will destroy the existing free market. The purpose of this study is to understand the effect of consumption, MSME credit, and capital expenditure on economic growth in Indonesia using the Least Square Panel (PLS) research method. We find that there is a positive influence between consumption and capital spending on Indonesia's economic growth. However, MSME credit had a negative impact on Indonesia's economic growth.